Patria Group Interim Report for 1 January–30 June 2016

The Patria Group’s result for the first half of the financial period improved significantly on the previous year. Net sales totalled EUR 253.6 million, compared to EUR 202.4 million in the previous year (+30.2%). Operating profit increased to EUR 40.8 million from EUR 10.1 million in 2015. Equity ratio was 50.3% (46.5%) and net gearing 23.9% (23.9%). The value of the order book fell to EUR 974.4 million from EUR 1,104.2 million a year earlier. A large part of the new orders received during the period is linked to the Aviation business and its maintenance and life-cycle support services for the military aviation sector.

First half of 2016

Patria announced a significant order for Patria AMV 8x8 armoured wheeled vehicles to be delivered to the United Arab Emirates. This agreement continues the successful co-operation between the UAE Armed Forces and Patria.

Patria acquired a minority stake (25%) in Silverskin Information Security Oy, a company specializing in cyber security. This acquisition allows Patria to expand its cyber security business, and it opens up new business opportunities both in the international market and in Finland.

Patria's subsidiary Millog Oy established a new company called Senop Oy, which will focus on modern sensor technology and advanced system integration.

The competition authorities approved a share transaction in which the State of Finland sold 49.9 percent of Patria Oyj to Kongsberg Defence & Aerospace AS. The total value of the transaction is EUR 283.5 million. The State of Finland now owns 50.1 percent of Patria Oyj. In this connection, an extraordinary shareholders' meeting appointed a new Board of Directors for Patria Oyj, which named Olli Isotalo, M. Sc. (Eng.), the new CEO effective as of 15 August 2016, after the planned retirement of the current CEO Heikki Allonen.

Senop Oy acquired the operations of Rikola Ltd Oy, an Oulu-based optoelectronics company. Following the acquisition, Rikola's business was transferred to Senop Oy, expanding the company's optoelectronics operations.

Patria became the third Finnish company to be awarded the Facility Security Clearance referred to in the new security clearance legislation. The clearance is audited and awarded by the Finnish Defence Forces.  The auditing process covers the administrative, physical, personnel and information security aspects of a company's operations.

During the first half of the year, Patria attended several major defence industry events. In January, the Patria AMV^XP armoured wheeled vehicle was on display at the International Armoured Vehicles 2016 event held in London. In March, Patria attended the DIMDEX event in Doha, Qatar, and in April the Defence Services Asia event in Kuala Lumpur, Malaysia, where equipment such as the Patria Nemo mortar system and the Patria AMV armoured modular vehicle were showcased.  In May, Patria took part in the Black Sea Defense & Aerospace (BSDA) 2016 event in Bucharest, Romania. A mortar event was co-organised with the Finnish Defence Forces in Rovaniemi and Rovajärvi, Finland, in May. In June, Patria attended the Eurosatory 2016 event, where four versions of the Patria AMV armoured modular vehicle were on display, in addition to the Patria AMV Part Task Trainer networked with Patria Nemo Training Simulator.

During the Eurosatory event, the presidency of the European Land Defence Industry Group (ELDIG) was passed from Patria to Leonardo-Finmeccanica. During Patria's presidency, ELDIG has developed its organisational policies and procedures, and promoted best practices within the industry.

Legal proceedings related to the Croatian export project ended

Turku Court of Appeal reversed an earlier district court decision and dismissed all charges of bribery and the demand for a corporate fine related to the Croatian export project in 2005–2008. The state was ordered to compensate Patria for the costs of legal proceedings and the prolonged trials. None of the parties to the case applied for permission to appeal against the decision of the Court of Appeal.

Responsibility

Patria will pursue further actions as part of the Society’s Commitment to Sustainable Development, coordinated by the Ministry of the Environment. Patria has pledged to develop the energy efficiency of the real estate property it manages and to further enhance occupational safety in order to reduce the number of accidents at work.

Patria and Vapo signed an agreement on cooperation regarding the development of energy solutions and partnership. The parties agreed to develop energy efficiency and increase the proportion of domestic fuels used. They also signed two significant, long-term agreements on heat supply.

Patria supports the restoration of the VL Myrsky, the only Finnish fighter aircraft to go into serial production. An important part of the restoration project involves 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 2019.

Outlook for the rest of the year

The Group expects to see further business growth in the second half. Profit performance will be somewhat more subdued, largely due to changes in the content of project deliveries. Patria's key domestic customer, the Finnish Defence Forces, currently has strategically significant and exceptionally large projects at the tendering and analysis phase. These projects will be decisive for the future of Finland's defence industry. In terms of orders, development depends on whether certain large export projects, now at the tendering stage, are launched on international markets, for instance in the Middle East and Australia, where the AMV35 reconnaissance vehicle jointly offered by BAE Systems Australia and Patria for the Australian Land 400 project was selected to undergo testing and assessment. Internal development measures within Patria will include further cost-efficiency improvement and flexibility enhancement.

For more information, please contact:

Ville Jaakonsalo, Chief Administration Officer, tel. +358 500 881 070, [email protected]

Birgitta Selonen, Vice President, Corporate Communications, +358 40 869 2043,
[email protected]