STOCK EXCHANGE RELEASE
February 5, 2008
- Net sales for 2007 increased 7% and reached an all time record at
242.5 MEUR (226.6 MEUR). Fourth quarter net sales were up 9% and
amounted to 53.7 MEUR (49.2 MEUR).
- Operating profit for 2007 was up 30% and totaled 28.3 MEUR (21.7
MEUR). Operating profit for the fourth quarter reached a good level
at 2.4 MEUR (0.7 MEUR). Comparable operating profit margin improved
clearly both for the fourth quarter and full year.
- Net result for 2007 was up 59% and reached an all time record 17.5
MEUR (11.0 MEUR) and was 2.0 MEUR (0.5 MEUR) for the fourth quarter.
Earnings per share increased to the highest level ever at 0.45 EUR
(0.28 EUR) for the full financial year and reached 0.05 EUR (0.01
EUR) for the fourth quarter.
- Cash flow from operations was up 82% to 18.2 MEUR (10.0 MEUR). Net
interest-bearing debt decreased strongly to 80.2 MEUR (Dec 2006: 99.3
MEUR) and gearing to a historically low 82.8% (122.2%).
Equity-to-asset increased to 38.2% (33.4%).
- Rapala continued to implement its strategy for profitable growth:
Terminator lures was acquired in the USA, a lure assembly factory
established in Russia, consolidation of French operations started, a
new distribution company opened in South Korea, the Irish lure
factory to be closed in April 2008 and cooperation with Shimano
increased to a new level by establishing joint distribution centers
in Hungary, Russia and Ukraine.
- The outlook for 2008 is quite good. It is expected that the Group's
net sales for 2008 will increase 8-12% assuming 2007 exchange rates.
Possible new acquisitions would further increase the sales. Assuming
2007 exchange rates and excluding non-recurring items, operating
profit margin is expected to improve from 2007.
- Board proposes to the Annual General Meeting a dividend of EUR 0.18
per share to be paid. This represents 40% of earning per share.
The attachment presents the summary of the annual review by the Board
of Directors and extracts from the financial statements for 2007.
A conference call on the 2007 result will be arranged today at 4.30
pm Finnish time (3.30 pm CET). Please dial +44 207 750 9950 or +1 866
676 5870 five minutes before the beginning of the event and request
to be connected to Rapala teleconference. A replay facility will be
available for 5 working days following the teleconference. The number
(pin code: 218149#) to dial is +44 207 750 99 28. Rapala's financial
information 2007 and annual summary of stock exchange releases and
announcements published in 2007 are available at www.rapala.com.
For further information, please contact:
Jorma Kasslin, President and Chief Executive Officer, +358 9 7562 540
Jouni Grönroos, Chief Financial Officer, +358 9 7562 540
Olli Aho, Investor Relations, +358 9 7562 540
Distribution: Helsinki Stock Exchange and Main Media
Market Situation and Sales
The general conditions in the fishing tackle market were quite good
in 2007. Due to normal weather conditions, the peak season for
fishing tackle business started somewhat earlier than in 2006, when
the summer season was clearly late. On the other hand, the season
also ended earlier in 2007. Market growth was strongest in East
Europe, South Africa, Australia and Asia. In West Europe and North
America, the trading conditions remained quite stable even if US
markets suffered somewhat from the weak dollar.
Year 2007 was characterized by strong emphasis on performance
improvement and cost cutting initiatives in the Group. These were
though executed so that the investment in business development and
sales growth was not limited.
The seasonality of the fishing tackle business has been reduced
during the last few years by expanding the Group's operations in
southern hemisphere and closer to equator by acquisitions, start-ups
and expanding existing operations. Even if almost 50% of the sales is
generated during the second half of the year, more than 80% of the
operating profit was still generated in the first six month of 2007.
Net sales were up 7% from last year and amounted to 242.5 MEUR (2006:
226.6 MEUR). Almost 90% of the growth was organic. This increase came
from all geographical segments except North America. Weakening of the
US dollar reduced North American sales by 5.8 MEUR. With comparable
exchange rates, Group's net sales were up 11% and North American up
4%.
All product lines except Accessories increased their sales and
Fishing Hooks made their all time sales record: lure sales were up
1%, fishing hooks 14%, third party fishing products 19% and other
products 13%. For more detailed information see the attached
accounts.
Financial Results and Profitability
IV IV I-IV I-IV
MEUR 2007 2006 2007 2006
Net sales 53.7 49.2 242.5 226.6
EBITDA 4.3 2.4 33.8 28.0
Operating profit (EBIT) 2.4 0.7 28.3 21.7
Profit before taxes 1.1 -0.3 23.3 14.6
Net profit for the period 2.0 0.5 17.5 11.0
Operating profit for 2007 was up 30% and reached 28.3 MEUR (21.7
MEUR). Also operating profit margin increased and amounted to 11.7%
(9.6%). Return on capital employed reached a good level at 15.9%
(12.3%).
Operating profit included several non-recurring items of which the
largest resulted from the sale of 50% of the new distribution
joint-venture to Shimano (+4.9 MEUR), the consolidation of French
operations (-2.5 MEUR), closing of Irish lure factory (-1.1 MEUR) and
negative goodwill from the acquisition of Terminator business (+1.0
MEUR). The net of other non-recurring items was -0.7 MEUR (-0.4
MEUR).
The operating profit was negatively affected by weakening of US
dollar and some other currencies (1.6 MEUR) as well as increase of
raw material prices and personnel costs especially in China. On the
other hand, the first result of several performance improvement
initiatives started to gradually capitalize during the second half of
the year. Also the increase of Group products sold in 2007 improved
the result. The result of currency hedges booked in financial items
was +1.0 MEUR (+0.3 MEUR).
Comparable operating profit margin, excluding non-recurring items and
using 2006 exchange rates, improved clearly and reached 11.2% (9.8%).
This was a major turnaround and stopped the trend of declining profit
margins.
Management Analysis I-IV I-IV I-IV I-IV
MEUR 2007 2006 2007 2006
Operating profit as
Net sales as reported 242.5 226.6 reported 28.3 21.7
Foreign exchange Non-recurring items
effects 10.0 0.0 (net) -1.6 0.4
Comparable net sales 252.5 226.6 Foreign exchange effects 1.6 0.0
Comparable operating
profit 28.3 22.1
Operating (profit) Comparable operating
margin 11.7% 9.6% margin 11.2% 9.8%
All geographical segments except Rest of Europe increased their
operating profit. The result in Rest of Europe was down due to
restructuring provisions in France, Ireland and few other countries.
The result in Nordic includes the gain from the sale of 50% of the
new distribution joint venture. For more detailed geographical
segment information, see the attached accounts.
Financial expenses were above previous year level as a result of
increased average interest rates. Net result for 2007 was up 59% and
reached an all time record 17.5 MEUR (11.0 MEUR). Also earning per
share increased to the highest level ever at 0.45 EUR (0.28 EUR).
Cash Flow and Financial Position
Cash flow from operating activities was up 82% from last year and
amounted to 18.2 MEUR (10.0 MEUR). Work to reduce working capital
compared to business volumes continued and started to show results.
Even if business volumes increased, the Group was able to reduce
working capital to 96.7 MEUR (97.8 MEUR). In 2007, working capital
(end of the year) to net sales was 40% (43%) excluding the start-up
inventories bought from Shimano in the end of 2007 for the new
distribution joint-venture.
Net cash used in investing activities amounted to 3.7 MEUR (14.7
MEUR) including capital expenditure of 9.9 MEUR (15.5 MEUR). This
includes the acquisition of Terminator lure business, second
installment of the Freetime acquisition closed in 2005 and the final
payment of the Guigo acquisition closed in 2004. The total purchase
price for acquisitions closed in 2007 is 2.1 MEUR of which 2.7 MEUR
is allocated to working capital, 0.9 MEUR to fixed assets, 0.5 MEUR
to liabilities and the difference is booked as negative goodwill.
Proceeds from sales of assets and disposal of subsidiary shares
totaled 6.3 MEUR. This includes the sale of 50% of the new
distribution joint-venture to Shimano (5.0 MEUR) and a number of
smaller disposals.
As part of the strengthening of the long-term distribution alliance,
Rapala issued 889 680 new shares to Shimano in October for the
subscription price of 5.62 EUR per share, which represented a
three-month weighted average trading price for the share. These new
shares will not give right to dividend paid from the financial year
2007 and they have a lock-up period of 12 months. The total proceed
from this share subscription was 5 MEUR.
Net interest-bearing debt decreased strongly to 80.2 MEUR (Dec 2006:
99.3 MEUR) as a result of positive cash flow and asset disposals.
Improved profitability and cash flow increased the equity-to-asset
ratio to 38.2% (Dec 2006: 33.4%). Gearing decreased to a historically
low 82.8% (Dec 2006: 122.2%). Group's liquidity has never been better
since it went public in 1998.
Strategy Implementation - Growth
Management continued discussions and negotiations regarding
acquisitions and business combinations throughout the year to further
implement the Group's strategy for profitable growth.
These discussions resulted in a major business combination when
Rapala and Shimano agreed to join forces in East European
distribution. Rapala has consistently aimed at developing and
deepening its fishing tackle distribution alliance with Shimano.
South East European distribution center established with Shimano
earlier in 2007 in Hungary has already proven to be a success. The
latest addition to this cooperation between Rapala and Shimano was
announced in October, when the companies decided to establish a joint
venture company to manage and develop their distribution in the
fastest growing market area in the fishing tackle business including
Russia and Ukraine. This transaction was completed in December and
the joint venture company, Rapala Shimano East Europe Oy, is owned
50/50 by the parties and controlled by Rapala. In 2008, this joint
venture is expected to increase Rapala's net sales more than 10 MEUR.
After this expansion of distribution alliance with Shimano, Rapala
distributes Shimano rods and reels in South Africa and in 22
countries in Europe. In Russia, the new joint venture will also
distribute bicycle parts.
In January 2007, Terminator branded spinner bait and lure business
was acquired in the USA. Terminator is number two in the US spinner
bait market with annual sales of some 2 MEUR. Currently these lures
are manufactured in a subcontract facility in Mexico but the
production is planned to be transferred later to Rapala's factory in
China.
Also organic growth continued strong. A lure assembling factory was
established in Russia and a new distribution company in South Korea.
The sales growth especially in Eastern Europe, Asia, Australia and
South Africa continued strong. Development of organic growth also in
terms of new product lines, extensions of current product categories
as well as special marketing, sales and brand initiatives continued.
Both the market coverage and the product portfolio were expanded and
the Group's position in current markets and product categories was
strengthened. New products for 2008 season were finalized and
introduced to distribution channels. The deliveries of these new
products started in the last quarter of 2007 and they have reached or
are about to reach the retail stores by now.
Strategy Implementation - Profitability
In addition to negotiations regarding acquisitions and business
combinations and development of new products and organic growth, the
emphasis on performance improvement initiatives was strengthened with
the target to turn around the declining trend in operating profit
margin and to further improve the Group's profitability.
The plan to consolidate Group's French operation into Morvillars was
published in June. This restructure will affect some 90 persons in
France, who were all offered work in the new location. Most of the
personnel did not want to move and the recruitment of new people
started in the fourth quarter. The relocation of distribution unit
Ragot has now been completed. Distribution unit Waterqueen and
fishing line supplier Tortue moves are planned for mid-2008 and hook
distributor VMC Europe during the third quarter. The total investment
in the new distribution centre is 0.5 MEUR. The plan is also to
invest 0.4 MEUR in line spooling facilities in order to further
improve operations. After all relocations have been made and the new
organisation is up and running, the annual savings are expected to
reach 1-2 MEUR. These savings will start to materialize from the
latter half of 2008 onwards and full effect will be seen in 2009.
To strengthen the Group's position as the world's leading
manufacturer of hard-bodied lures and increase production
efficiencies and capacity, Rapala started the restructuring and
development of its lure manufacturing operations in Europe in early
2007 by establishing a lure assembly factory in Russia. In December,
the plan to close the lure factory in Ireland was published. The
manufacturing operations in Ireland will discontinue in the end of
April 2008. The average number of personnel in the Irish factory has
been declining in the last few years and was some 20 persons at the
end of 2007. The manufacturing functions of the Irish factory will be
taken over by the Group's lure factory in Estonia that will continue
finalizing, testing and packaging the products. At the same time,
significant part of assembly work is being transferred from Estonia
to the new factory in Russia, which currently employs some 50
persons. After the closing of the Irish factory and transfer of its
duties to the Estonian factory, the annual savings are expected to
reach some 0.7 MEUR.
During 2007, major operational changes and improvements were started
also in the Group's manufacturing facility in China. This development
project is supported by an international team of professionals and
the target is to enhance the production efficiencies and shorten the
lead time to restore the profitability of the operations that has
been burdened by the increased raw material prices and personnel
costs. The first results of this project started to capitalize during
the last quarter of 2007 but the full benefits are expected to
materialize later in 2008 when the new production planning system and
related new processes are implemented.
The South East European distribution center established with Shimano
earlier in 2007 in Hungary has already proven to be a success not
only regarding sales growth but also profitability.
Also few organizational changes have been made in distribution units
with unsatisfactory performance. In addition, the Group has
introduced and implemented several cost cutting initiatives. Most of
these initiatives have been completed and the results have started to
materialize gradually. The full impact of these will be seen from the
beginning of 2008 onwards.
Personnel and R&D
Number of personnel increased 11% during the year and was 4 356 (3
921) at the year end. The average number of personnel increased to 4
577 (3 987). Largest increases were in China and Russia.
Research and development expenses increased to 1.6 MEUR (1.2 MEUR) in
2007.
Risk Management and Environmental Affairs
The Group principles for risk management and environmental affairs
were confirmed during 2007. These principles as well as the work done
and progress made in these areas are described in the annual report
for 2007.
Outlook for 2008
The outlook for 2008 is quite good. No major changes in the
competition of fishing tackle market are expected. The general
uncertainty especially in the US economy is not expected to have a
significant effect on Group sales in 2008. It is expected that the
Group's net sales for the financial year 2008 will increase 8-12%
assuming 2007 exchange rates. Possible new acquisitions during 2008
would further increase the sales.
Special initiatives started during 2007 to further improve Group's
profitability are gradually starting to capitalize during 2008. In
addition, prices have been increased in several markets to compensate
for recent cost increases. Business development and start-up costs
are expected to remain on 2007 levels while new initiatives are
planned and implemented. Assuming 2007 exchange rates and excluding
non-recurring items, operating profit margin is expected to improve
in 2008 compared to 2007.
In the end of 2007, order backlog was close to last year levels at
35.2 MEUR (35.8 MEUR).
In January 2008, Rapala signed a sale agreement for the warehouse and
office building in Saint Marcel as part of the consolidation of
operations in France and will book a capital gain of some 0.9 MEUR in
the first quarter of 2008. The plan is also to sell the warehouse and
office building in Loudeac in 2008.
Negotiations and discussions for new acquisitions and business
combinations continue while new products and applications are being
planned and developed. New products for 2009 season have just been
finalized and they will be introduced to the distributors within the
next few months. Reduction of working capital compared to business
volume and improvement of cash flow remain an important target also
in 2008.
Proposal for Profit Distribution
The Board of Directors proposes to the Annual General Meeting that a
dividend of EUR 0.18 for 2007 (2006: EUR 0.12) per share be paid from
the Group's distributable funds and that any remaining distributable
funds be allocated to retained earnings. At December 31, 2007, the
parent company's distributable funds totaled 54.2 MEUR.
No material changes have taken place in the Group's financial
position after the end of the financial year 2007. Group's liquidity
is good and the view of the Board of Directors is that the
distribution of the proposed dividend will not undermine this
liquidity.
Helsinki, February 5, 2008
Board of Directors of Rapala VMC Corporation
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
CONSOLIDATED INCOME STATEMENT IV IV I-IV I-IV
MEUR 2007 2006 2007 2006
Net sales 53.7 49.2 242.5 226.6
Other operating income 5.5 1.0 6.7 1.5
Cost of sales 31.1 29.6 135.8 128.3
Other costs and expenses 23.7 18.3 79.6 71.9
EBITDA 4.3 2.4 33.8 28.0
Depreciation 1.8 1.6 5.4 6.3
Operating profit (EBIT) 2.4 0.7 28.3 21.7
Financial income and expenses 1.3 1.0 5.0 7.1
Share of results in associated companies 0.0 0.0 0.0 0.0
Profit before taxes 1.1 -0.3 23.3 14.6
Income taxes -0.9 -0.8 5.8 3.6
Net profit for the period 2.0 0.5 17.5 11.0
Attributable to:
Equity holders of the Company 2.0 0.4 17.3 10.8
Minority interest 0.1 0.1 0.3 0.2
Earnings per share for profit attributable
to the equity holders of the Company:
Earnings per share, EUR (diluted = non-diluted) 0.05 0.01 0.45 0.28
CONSOLIDATED STATEMENT OF CASH FLOWS IV IV I-IV I-IV
MEUR 2007 2006 2007 2006
Net profit for the period 2.0 0.5 17.5 11.0
Adjustments to net profit for the period * 0.7 2.8 14.8 19.2
Financial items and taxes paid and received -3.1 -3.5 -11.1 -12.1
Change in working capital 0.2 0.2 -3.1 -8.1
Net cash generated from operating activities -0.3 -0.1 18.2 10.0
Investments -2.4 -2.6 -7.2 -7.2
Proceeds from sales of assets 0.0 0.1 0.4 0.6
Acquisition of subsidiaries, net of cash 0.0 -2.1 -2.7 -8.3
Proceeds from disposal of subsidiaries, net of
cash 5.4 0.0 5.9 0.0
Change in loans receivable -0.2 0.2 -0.1 0.2
Net cash used in investing activities 2.8 -4.4 -3.7 -14.7
Dividends paid 0.0 0.0 -4.6 -4.2
Net funding -5.3 6.6 -11.5 14.7
Proceeds from share subscriptions 5.0 0.0 5.0 0.4
Net cash generated from financing activities -0.4 6.6 -11.1 10.9
Adjustments 0.4 0.0 0.4 0.0
Change in cash and cash equivalents 2.5 2.2 3.8 6.2
Cash & cash equivalents at the beginning of the
period 25.3 22.7 24.4 19.2
Foreign exchange rate effect -0.5 -0.4 -0.9 -1.0
Cash and cash equivalents at the end of the
period 27.3 24.4 27.3 24.4
* Includes reversal of non-cash items, income taxes and financial
income and expenses.
CONSOLIDATED BALANCE SHEET Dec 31 Dec 31
MEUR 2007 2006
ASSETS
Non-current assets
Intangible assets 51.1 53.3
Property, plant and equipment 28.4 29.4
Non-current financial assets
Interest-bearing 0.6 0.6
Non-interest-bearing 8.0 6.3
88.1 89.6
Current assets
Inventories 84.3 73.0
Current financial assets
Interest-bearing 0.1 0.2
Non-interest-bearing 52.8 56.5
Cash and cash equivalents 27.3 24.4
164.6 154.0
Assets classified as held-for-sale 0.9 0.0
Total assets 253.7 243.6
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the
Company 96.0 80.7
Minority interest 0.9 0.6
96.9 81.3
Non-current liabilities
Interest-bearing 49.8 64.6
Non-interest-bearing 6.4 6.6
56.3 71.1
Current liabilities
Interest-bearing 58.4 59.9
Non-interest-bearing 42.0 31.3
100.5 91.2
Total equity and liabilities 253.7 243.6
Rounding of figures
All figures in these accounts have been rounded. Consequently the sum
of individual figures can deviate from the presented sum figure. Key
figures have been calculated using exact figures.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the
Company
Cumu- Fund for
lative invested
Share trans- non- Re- Mino-
pre- Fair lation rest- tained rity
Share mium value diffe- ricted earn- inte- Total
MEUR capital fund reserve rences equity ings rest equity
Equity on Jan 1,
2006 3.5 16.3 - -4.5 - 60.0 0.2 75.4
Change in
translation
differences - - - -2.6 - - - -2.6
Gains and losses
on hedges of net
investments 0.0 0.0
Fair value gains
on
available-for-sale
investments, net
of tax - - 0.1 - - - - 0.1
Net income
recognized
directly in equity - - 0.1 -2.6 - - - -2.5
Net profit for the
period - - - - - 10.8 0.2 11.0
Total recognized
income and
expenses - - 0.1 -2.6 - 10.8 0.2 8.5
Dividends paid - - - - - -4.2 - -4.2
Shares subscribed
with options 0.0 0.4 - - - - - 0.4
Share option
program - - - - - 0.8 - 0.8
Other changes - - - - - 0.2 0.2 0.4
Equity on Dec 31,
2006 3.5 16.7 0.1 -7.1 - 67.6 0.6 81.3
Equity on Jan 1,
2007 3.5 16.7 0.1 -7.1 - 67.6 0.6 81.3
Change in
translation
differences - - - -3.4 - - - -3.4
Gains and losses
on cash flow
hedges - - 0.0 - - - - 0.0
Gains and losses
on hedges of net
investments - - - 0.7 - - - 0.7
Fair value gains
on
available-for-sale
investments, net
of tax - - 0.0 - - - - 0.0
Net income
recognized
directly in equity - - -0.1 -2.7 - - - -2.7
Net profit for the
period - - - - - 17.3 0.3 17.5
Total recognized
income and
expenses - - -0.1 -2.7 - 17.3 0.3 14.8
Private offering 0.1 - - - 4.9 - - 5.0
Dividends paid - - - - - -4.6 - -4.6
Shares subscribed
with options 0.0 0.0 - - - - - 0.0
Share option
program - - - - - 0.4 - 0.4
Other changes - - - - - 0.0 0.1 0.1
Equity on Dec 31,
2007 3.6 16.7 0.0 -9.8 4.9 80.6 0.9 96.9
SEGMENT INFORMATION** IV IV I-IV I-IV
MEUR 2007 2006 2007 2006
Net Sales by Area**
North America 13.4 14.3 66.7 69.7
Nordic 21.0 22.1 96.0 94.2
Rest of Europe 19.3 18.0 92.1 83.0
Rest of the world 16.3 11.7 62.9 43.7
Intra-Group -16.2 -16.9 -75.2 -64.0
Total 53.7 49.2 242.5 226.6
Operating Profit by Area**
North America 1.0 1.2 7.5 6.4
Nordic 5.2 0.5 12.5 6.9
Rest of Europe -5.3 0.8 3.4 7.0
Rest of the world 2.7 -1.0 5.4 2.8
Intra-Group -1.1 -0.9 -0.3 -1.4
Total 2.4 0.7 28.3 21.7
Net Sales by Product line***
Lures 11.1 16.2 73.9 73.0
Fishing Hooks 3.7 3.4 16.9 14.8
Fishing Accessories 13.8 13.9 43.5 45.8
Third Party Fishing Products 11.4 3.9 63.4 53.5
Other 14.2 12.7 47.8 42.4
Intra-Group -0.5 -0.7 -3.2 -2.9
Total 53.7 49.2 242.5 226.6
** Note: This primary segment information is by geographical areas
and it has been prepared on source basis i.e. based on the location
of the business unit. Each area shows the sales/profit generated in
that area excluding intra-Group transaction within that area, which
have been eliminated. Intra-Group line includes the eliminations of
intra-Group transactions between geographical areas.
*** Note: This secondary segment information is by product lines.
Lures, Fishing Hooks and Fishing Accessories consist of Group branded
fishing tackle products. Third Party Fishing Products consist of
non-Group branded fishing products, mostly rods and reels. Other
Products consist of non-Group branded (third party) products for
hunting, outdoor and winter sports and Group branded products for
winter sports and some other businesses.
KEY FIGURES IV IV I-IV I-IV
2007 2006 2007 2006
EBITDA margin, % 7.9% 4.8% 13.9% 12.4%
Operating profit margin, % 4.5% 1.5% 11.7% 9.6%
Return on capital employed, % 5.4% 1.7% 15.9% 12.3%
Capital employed at end of period, MEUR 177.1 180.6 177.1 180.6
Net interest-bearing debt at end of
period, MEUR 80.2 99.3 80.2 99.3
Equity-to-assets ratio at end of period,
% 38.2% 33.4% 38.2% 33.4%
Debt-to-equity ratio at end of period, % 82.8% 122.2% 82.8% 122.2%
Earnings per share, EUR 0.05 0.01 0.45 0.28
Average number of shares outstanding
(1000) 39 381 38 576 38 781 38 565
Fully diluted earnings per share, EUR 0.05 0.01 0.45 0.28
Fully diluted average number of shares
(1000) 39 381 38 620 38 781 38 609
Equity per share at end of period, EUR 2.43 2.09 2.43 2.09
Number of shares outstanding at end of
period (1000) 39 468 38 576 39 468 38 576
Average personnel for the period 4 576 3 964 4 577 3 987
KEY FIGURES BY
QUARTERS I II III IV I-IV I II III IV I-IV
MEUR 2006 2006 2006 2006 2006 2007 2007 2007 2007 2007
Net sales 63.4 64.2 49.8 49.2 226.6 63.4 73.4 52.0 53.7 242.5
EBITDA 11.6 9.7 4.4 2.4 28.0 12.3 12.6 4.6 4.3 33.8
Operating profit
(EBIT) 10.0 8.1 2.8 0.7 21.7 12.0 11.0 2.9 2.4 28.3
Profit before
taxes 7.8 6.1 1.0 -0.3 14.6 11.0 9.8 1.4 1.1 23.3
Net profit for
the period 5.7 4.5 0.4 0.5 11.0 7.7 6.7 1.1 2.0 17.5
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
This report has been prepared in accordance with IAS 34 (Interim
Financial Reporting). The accounting principles adopted in the
preparation of the interim report are consistent with those followed
in the preparation of the Group's Annual Financial Statements 2006,
except for the adoption of new and amended standards and
interpretations: IFRS 7 (Financial Instruments), amendment to IAS 1
(Presentation of Financial Statements - Capital Disclosures), IFRIC 8
(Scope of IFRS 2), IFRIC 9 (Reassessment of Embedded Derivatives) and
IFRIC 10 (Interim Financial Reporting and Impairment). Adoption of
these interpretations and standards did not result in any changes in
the accounting principles that would have affected the information
presented in this interim report.
Use of estimates
Complying with the IFRS standards in preparing financial statements
requires the management to make estimates and assumptions. Such
estimates affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the amounts of
revenues and expenses. Although these estimates are based on the
management's best knowledge of current events and actions, actual
results may differ from these estimates.
Definition of key figures
The definitions of key figures used in the interim report are
consistent with those used in the Group's Annual Financial Statements
2006.
Events after the end of the interim period
The Group has no knowledge of any significant events after the end of
the interim period that would have a material impact on the financial
statements for January-December 2007. Material events after the end
of the interim period, if any, have been discussed in the annual
review by the Board of Directors.
Inventories
In 2007, the book value of inventories differed from its net
realizable value by EUR 2.4 million (EUR 1.0 million).
Assets held-for-sale
As part of the consolidation of it's French operations, Rapala signed
a sale agreement for the warehouse and office building in Saint
Marcel in January 2008. The plan is also to sell the building in
Loudeac during 2008.
Hedging of net investments in foreign subsidiaries
During the first quarter of 2007, the Group started to partially
hedge its net investments in USD, AUD, JPY and NOK currency
denominated foreign subsidiaries using equivalent currency loans. The
Group also plans to start to partially hedge its net investment in
SEK currency denominated foreign subsidiaries. Hedging relationships
are treated according to IAS 39 as effective hedges of a net
investment in a foreign subsidiary, which means that the effective
portion of foreign exchange effect on these loans is recorded
directly in equity.
Open derivatives
31.12.2007 31.12.2006
Foreign currency Interest Foreign currency
MEUR forwards rate swaps Total forwards
Nominal
amount 7.9 12.9 20.8 1.0
Net fair
values -0.1 0.0 -0.2 0.0
Commitments
Dec 31 Dec 31
MEUR 2007 2006
On own behalf
Business mortgage 16.1 16.6
Property mortgage 0.0 0.3
Pledges 0.0 0.8
Guarantees 2.1 1.1
On behalf of other parties
Guarantees 0.6 0.6
Minimum future lease payments on operating leases 9.5 12.6
Related party transactions
Rents Other
MEUR Purchases paid expenses Receivables Payables
I-IV 2007
Associated company
Lanimo Oü 0.1 - - - -
Entity with
significant influence
on the Group* - 0.1 0.1 0.0 -
I-IV 2006
Associated company
Lanimo Oü 0.1 - - - 0.1
* Lease agreement for the real estate for the consolidated operations
in France and a service fee.
Non-recurring income and expenses in operating profit
IV IV I-IV I-IV
MEUR 2007 2006 2007 2006
Sale of 50% of Rapala Shimano East Europe Oy 4.9 - 4.9 -
Consolidation of French operations -2.5 - -2.5 -
Closure of Irish lure factory -1.1 - -1.1 -
Other disposals of assets 0.0 -0.1 0.4 -0.1
Excess of Group's interest in the net fair values
of acquired net assets over costs (negative
goodwill) -0.2 - 1.0 -
Other restructuring costs -0.3 -0.2 -1.3 -0.2
Other non-recurring items - -0.1 0.1 -0.1
Total 0.7 -0.4 1.6 -0.4
Impact of acquisitions and disposals on the consolidated financial
statements
In January, Rapala acquired the fishing tackle business of Outdoor
Innovations LLC and Horizon Lures LP, USA based manufacturers and
distributors of Terminator branded spinner baits and other fishing
lures. The deal includes patents for the use of nickel titanium wire
in fishing lures, trade marks, customer lists, inventories and some
other assets.
In April, Rapala acquired 10% minority stake of Rapala's Hungarian
distribution company, Rapala Eurohold Ltd ("Rapala Eurohold"), from
Mr Agh Senior. Acquisition raised Rapala's ownership to 80%.
Also in February and April, Rapala made a 0.2 MEUR final payment of
the Guigo acquisition closed in 2004 and in May a 0.8 MEUR first
settlement of final payment of the Freetime acquisition closed in
2005.
.
Acquisitions by Dec 31, 2007 Seller's
Fair carrying
MEUR value amount
Working capital 2.7 2.7
Intangible assets 0.7 0.1
Tangible assets 0.1 0.1
Deferred tax liability -0.5 0.0
Fair value of acquired net assets 2.9 2.9
MEUR I-IV 2007
Cash paid 1.5
Cash to be paid 0.4
Payment of the Freetime acquisition closed in 2005 0.8
Final payment of the Guigo acquisition closed in
2004 0.2
Costs associated with the acquisitions 0.1
Total purchase consideration 3.1
Excess of Group's interest in the net fair value of
acquired net assets over cost -1.0
Goodwill 0.2
Net -0.9
Cash paid for the acquisitions 2.7
Cash and cash equivalents acquired 0.0
Net cash flow 2.7
In May, Rapala and Shimano, one of the leading manufacturers of rods
and reels worldwide, strengthened their distribution alliance in
Hungary and South-East Europe. Shimano subscribed a 33.4%
shareholding in Rapala Eurohold. Rapala's ownership is now 56.6% and
the Managing Director of Rapala Eurohold, Mr Agh Jr, has the
remaining 10% ownership. The funds from this transaction are invested
in strengthening the sales and marketing in South-East Europe.
In October 2007, Rapala and Shimano decided to strengthen their
distribution alliance in Russia and Ukraine by establishing a 50/50
joint venture company in Finland, controlled by Rapala. This joint
venture company, Rapala Shimano East Europe Oy, acquired existing
Rapala distribution companies in both of these countries. As a result
of the new joint venture, these distribution companies started to
distribute, in addition to their current product offering, Shimano
reels, rods and other Shimano fishing tackle products on exclusive
basis. The distribution company in Russia also started to distribute
Shimano bicycle parts.
In addition to these partial disposals, the assets of the French
Guigo fishing tackle shop where sold in December 2007.
Partial disposals of subsidiaries by Dec 31, 2007 I-IV 2007
Disposed working capital 0.1
Share of disposed goodwill 0.4
Share of disposed minority interest 0.1
Gain on disposals 5.3
Total consideration 5.9
Consideration received in cash 5.9
Share-based payments
The Group has three separate share-based payment programs: two stock
option programs and one synthetic option program settled in cash.
Terms and conditions of the option program are described in detail in
the Annual Report 2006. The options are valued at fair value on the
grant date by using the Black-Scholes option-pricing model. The total
estimated value of the program is 5.1 MEUR. Share-based payment
programs are valued at fair value on the grant date and recognized as
an expense in the income statement during the vesting period with a
corresponding adjustment to the equity or liability.
Grant date is the date at which the entity and another party agree to
a share-based payment arrangement, being when the entity and the
counterparty have a shared understanding of the terms and conditions
of the arrangement. 1 909 500 share option where granted on June 8,
2004, 92 500 share options on February 14, 2006 and 978 500 synthetic
options on December 14, 2006. On March 31, 2007, the exercise period
for the 2003A stock option program expired. All 500 000 shares were
subscribed. The 2003B stock option program is exercisable between
March 31, 2006 and March 31, 2008 at an exercise price of 6.02 EUR
per share, the 2004A stock option program is exercisable between
March 31, 2007 to March 31, 2009 at an exercise price of 5.96 EUR per
share, the 2004B stock option program is exercisable between March
31, 2008 and March 31, 2010 at an exercise price of 6.09 EUR, the
2006A synthetic option program is exercisable between March 31, 2009
and March 31, 2011 at an exercise price of 6.32 EUR and the 2006B
synthetic option program is exercisable between March 31, 2010 and
March 31, 2012 at an exercise price of 6.32 EUR. The exercise prices
have been reduced by the amount of dividends distributed after the
subscription period for option rights has ended and before the
commencement of the subscription period. Applying of IFRS 2 reduced
operating profit with 0.9 MEUR in January-December 2006 and 0.8 MEUR
in January-December 2007.
Shares and share capital
Based on authorization given by the Annual General Meeting in April
2007, the Board can decide to issue shares through issuance of
shares, options or special rights entitling to shares in one or more
issues. The number of new shares to be issued including the shares to
be obtained under options or special rights shall be no more than 10
000 000 shares. This authorization includes the right for the Board
to resolve on all terms and conditions of the issuance of new shares,
options and special rights entitling to shares, including issuance in
deviation from the shareholders' preemptive rights. This
authorization is in force for a period of 5 years from the resolution
by the Annual General Meeting. The Board is also authorized to
resolve to repurchase a maximum of 2 000 000 shares. This amount of
shares corresponds to less than 10% of all shares of the company.
This authorization is in force until September 30, 2008.
In March 2007, 2 500 new shares where subscribed with 2003A option
rights. The share capital increased with EUR 225.00 and the
subscriptions were registered in the Trade Register on April 4, 2007
and listed on the main list of the OMX Nordic Exchange Helsinki on
April 5, 2007. All 500 000 shares have now been subscribed with 2003A
option rights.
In October 2007, 889 680 new shares were issued to Shimano for the
subscription price of EUR 5.62 per share, which represented a
three-month weighted average share price for the share from June 27
to September 27. The share capital increase of EUR 80 071.20
corresponding to the subscription was registered in the Trade
Register on October 24, 2007. The new shares where listed as a new
class of shares on the main list of the OMX Nordic Exchange Helsinki
on October 25, 2007.These new shares will not give right to dividend
paid from the financial year 2007 and they have a lock-up period of
12 months. The new restricted class of shares shall be combined to
the old class of shares as soon as the difference regarding the right
to dividend between the classes no longer exists i.e. October 24,
2008. As a result of the share capital increase, Rapala's share
capital was EUR 3 552 160.41 and the total number of outstanding
shares 39 468 449 at December 31, 2007.
As a result of the share subscriptions with the 2003 and 2004 stock
option programs, and if all stock options are fully exercised, the
Group's share capital may still be increased by a maximum of 121 425
EUR and the number of shares by a maximum of 1 349 168 shares. The
shares that can be subscribed with these stock options correspond to
3.4% of the Company's shares and voting rights.
8 684 433 shares (12 468 161 shares) were traded during the year. The
shares traded at a high of 6.27 EUR and a low of 5.40 EUR during the
period. The closing share price at the end of the period was 5.55
EUR.
Business risks and seasonality of the business
Rapala currently operates in 30 countries in all major continents.
There are no signs of significant changes in markets or fishing
tackle business as such due to new product launches, product category
introductions or competitor actions. Group's customers are acting
mainly in local markets, consisting mainly of mass retailers offering
a wide range of products and specialized fishing tackle and outdoor
retailers. Group's sales and operating profit have traditionally been
quite seasonal due to the geographic location of the Group operations
and the seasonality of the fishing tackle business. The seasonality
has been slightly mitigated in the last two years through the
acquisitions of distribution companies on the southern hemisphere.
For more information on the Group's financial risk and risk
management see Annual Report 2006 on www.rapala.com.
