Patria Group Interim Report for 1.1.-30.6.2015
The Patria Group’s result for the first half of the financial period decreased as expected compared to the previous year. Net sales were EUR 202.4 million, compared to EUR 260.2 million in the previous year. Operating profit decreased to EUR 10.1 million from EUR 22.7 million in 2014. Equity ratio was 46.5% (59.7%) and net gearing 23.9% (-6.5%). Order stock grew from EUR 1,104.2 million, compared to EUR 739,2 million in the previous year. The growth of order stock compared to last year is partly the result of the contract which expands Millog’s operations so that the repair shops of the various Army training units, two Army depots and the Navy’s maintenance centres and its central depot were transferred to Millog on 1 January 2015. In this connection also the number of Patria’s personnel grew with more than 300 employees. The Group’s result is clearly affected by the completion of certain important delivery projects, particularly in the Land business unit.
Early 2015
Patria’s operations were adopted to meet the rather difficult market situation in certain business areas. The ongoing and continuing development measures showed positive progress.
Patria and Kongsberg Defence & Aerospace AS signed a partnership agreement on participation in certain projects focusing on the delivery of vehicle and weapon systems in the Middle East. Together, the companies form a powerful team in terms of meeting future customer needs while cooperatively developing their systems and customer-specific solutions.
Poland’s Ministry of Defence placed an additional order for AMV 8x8 vehicles from Patria’s Polish partner Rosomak S.A. Patria will deliver component kits for approximately 200 vehicles to Rosomak S.A. for assembly under Patria licence. The deliveries will take place during 2015–2019. The order is worth EUR 90 million, and it increases the volume of outstanding orders in Patria’s order book, but will not bring significant additional work for the Hämeenlinna unit in Finland.
The National Police Board, Patria, Portalify Oy and Codea Oy signed a delivery agreement concerning KEJO, a shared field system for security officers. It will be implemented in 2015–2017. The total value of the agreement is approximately EUR 23 million.
In February, Patria participated in the international defence and security industry’s International Defence Exhibition and Conference (IDEX 2015) held in Abu Dhabi, the United Arab Emirates. Patria presented the Patria AMV armoured wheeled vehicle, the Nemo training simulator and Millog’s optronics products.
Patria and the Finnish Defence Forces signed a strategic partnership agreement on the provision of life-cycle services for military aviation systems. It covers life-cycle support services for the Finnish Defence Forces’ military aircraft and aviation systems, for example the F/A-18 Hornet fighters of the Finnish Air Force and the NH90 transport helicopters of the Finnish Army.
Patria and RUAG Sweden AB, subsidiary of the Swiss RUAG AG agreed on the transfer of Patria’s Space unit to be integrated into RUAG’s extensive space business. All the 29 employees at the Patria Space unit, located in Tampere, were transferred to the employment of RUAG Space Finland, a company recently founded.
The Kazakhstan Civil Aviation Academy and Patria signed a continuation agreement on the provision of commercial pilot training for a second group of students. Patria Pilot training will train 14 Kazakh students by the end of 2016.
A decision was made to locate the Patria Pilot Training flight school in the Tampere–Pirkkala airport and to found a new aviation training centre there. Operations in the new facilities currently under construction will begin in May 2017. Until that time, the City of Helsinki and Finavia have undertaken to ensure the availability of Malmi Airport for Patria’s operations.
Patria delivered the last of the 20 NH90 helicopters to the Finnish Defence Forces in June. The project will continue as a retrofit project in which the helicopters in primary configuration will be fitted to the final operational configuration.
Cooperation negotiations
Patria conducted employee cooperation negotiations in its Land business unit in February involving all employees. The resulting need for staff cuts was 55 clerical workers and 19 employees. In addition, 10 production employees will be temporarily laid off at the end of the year.
Patria conducted employee cooperation negotiations in its Aerostructures business unit in May involving all employees. The staff reduction need was defined as nine persons. This will include both temporary and permanent layoffs. Furthermore, almost all personnel will be temporarily laid off for a maximum of four weeks, in addition to which 15 people will be placed on part-time layoffs.
Court proceedings
In February, the District Court of Kanta-Häme sentenced two former Patria employees to conditional imprisonment for aggravated bribery in relation to the Croatian export project in 2005–2008. The charges against one person were dismissed. The judgment also included a corporate fine of EUR 297,000 imposed on Patria Land Services Oy. The company and the individual defendants have announced dissatisfaction with the judgement, and the case proceedings will continue in the Court of Appeal in autumn 2015. The prosecutor has also appealed against the judgement.
In June, the Turku Court of Appeal dismissed all charges and the demand for a corporate fine related to the Slovenian export project of 2005–2007. The District Court had previously dismissed all charges and the demand for a corporate fine. The Court of Appeal increased the compensation for District Court costs the State was obliged to pay, and ordered the State to compensate for some of the legal costs of Patria Land Services Oy and the other defendants in the Court of Appeal.
Responsibility
In April, Transparency International UK published the Defence Companies Anti-Corruption Index 2015 study. Patria was ranked well in the study compared to Patria’s peer-companies and to its competitors and improved its ranking from the previous study.
As part of the Society’s Commitment to Sustainable Development, a framework coordinated by the Ministry of the Environment, Patria pledged to develop the energy efficiency of its real estate property and to further enhance occupational safety in order to reduce the number of accidents at work.
Patria has continued to support the restoration of the VL Myrsky, the only Finnish fighter aircraft having gone into serial production. An important part of the restoration efforts involve young people working in youth workshops in Jyväskylä and Vantaa or studying in technical education institutions. The project will take an estimated six years and the Myrsky will be ready for exhibition in the autumn of 2019.
Outlook for the rest of the year
Patria’s order book continues to be affected by intensified competition for new projects within the defence industry. The Group’s net sales is expected to decline year on year while profitability remains on a satisfactory level. The outcome of some significant international projects, under bidding and preparation for a long time, is expected to be determined by the end of the year. Also, preparations for significant future procurement programs of the Finnish defence forces, which are key focus areas for Patria, have taken off.
The State has started a process to look for an industrial partner to become a minority shareholder in Patria. The goal is to find an industrial partner for Patria opening new opportunities for further development of the company’s business.
For more information, please contact:
Ville Jaakonsalo, Chief Administration Officer, tel. +358 500 881 070, [email protected]
Patria is a trusted provider of defence, security and aviation life cycle support services and technology solutions. Besides Finland, the Group has operations in Sweden, Norway, Estonia, Poland, the United Arab Emirates and South Africa. Patria employs 2,900 professionals.
