Patria’s Financial Review for 2015 – preliminary data
Key figures - The details provided here are preliminary only. The details will be confirmed at the Annual General Meeting on 6 April 2016
Patria Group's earnings for the financial year 2015 measured up to expectations. Net sales fell slightly and profitability remained at a satisfactory level. During the financial period the foundations for significant Group-level changes, the most important of which for the Company is the ownership structure of Patria, were laid. The State of Finland as the owner, in collaboration with the management and Board of the company, explored opportunities for finding an industrial partner for Patria and thereby opening up new business opportunities for the company. Another important change involved over 300 new Millog employees becoming part of the Group when both Finnish Army repair shops and Navy maintenance centres were integrated into Millog Oy.
New orders and order stock
The value of new orders received during the Financial Period was EUR 299.0 million (EUR 875.7 million in 2014). The amount of new orders in 2014 was exceptionally large due to the strategic partnership agreement signed between Millog Oy and The Finnish Defence Forces. Defence material and life cycle support accounted for 92% (95%) and civilian products for 8% (5%) of the new orders. At the end of December, the Group’s order stock was EUR 1 056.4 million (EUR 1 201.7 million).
Net sales and profitability
The Group’s net sales for the Financial Period decreased as predicted 7.5% from 2014 and totalled EUR 427.7 million (EUR 462.0 million in 2014 and EUR 589.5 million in 2013). Defence material and maintenance accounted for 93% (89%) and civilian products for 7% (11%) of the net sales. Sales outside Finland for the Financial Period accounted for 31% (50%) of the net sales.
The Group’s operating profit for the Financial Period was EUR 46.8 million, representing 10.9% of net sales (2014: EUR 56.0 million, 12.1%; 2013: EUR 87.8 million, 14.9%). The consolidated income before taxes for the Financial Period amounted to EUR 44.4 million (2014: EUR 54.7 million; 2013: EUR 84.7 million). The Group’s return on equity for the Financial Period was 19.0% (2014: 18.7%; 2013: 21.4%).
Significant projects
Many projects important for the future of the Company proceeded as planned during the financial year. Patria and the Finnish Defence Forces signed a strategic partnership agreement on the provision of life-cycle services for military aviation systems. Patria delivered the last NH90 helicopter to The Finnish Defence Forces. The initial assembly was completed, and the project will continue as a retrofit project.
Patria Helicopters signed a contract for the delivery of NH90 spare parts to the Swedish Armed Forces. In December the Finnish Defence Forces placed an order for the upgrade of seven Hawk Mk51 jet trainers' avionics systems.
Poland’s Ministry of Defence placed an additional order for AMV 8x8 vehicles from Patria’s Polish partner, Rosomak S.A. Patria will deliver components for 200 vehicles for Rosomak S.A., which produces the vehicles under Patria’s license. Patria and BAE Systems Australia submitted their bid for armoured reconnaissance vehicles for the Australian Land 400 project.
The National Police Board, Patria, Portalify Oy and Codea Oy signed an agreement for the delivery of a Common Field Command System (KEJO) for all Finnish Public Protection and Disaster Relief (PPDR) authorities.
During the financial year, and its latter half in particular, signs of revival were evident in the defence industry market due to the erosion of global security. At the same time, the global economy continued its decline and increasing competition in many markets prolonged some ongoing tenders.
Reorganisation of operations
In May 2015 Patria sold its Space unit to RUAG according to the agreement made in December 15, 2014. The transaction included the business operations and assets of the Space unit of Patria Systems business unit. The 29 employees of Patria’s Space unit in Tampere are now employed in the newly founded company RUAG Space Finland.
In December 2015, Millog Oy focused its sensor technology development and demanding system integration production to Oricopa Oy, and Millog's group structure was also simplified. After the structural changes, the Millog group consists of Millog Oy and its two fully owned subsidiaries, Oricopa Oy (as of 11 January 2016, Senop Oy) and Oricopa Kiinteistöt Oy.
Responsibility and transparency of operation
During 2015 a questionnaire charting stakeholder views on Patria's key Corporate Social Responsibility (CSR) themes, was carried out. The key and most topical issues were partnership, security of supply and various issues related to ethical conduct. The stakeholders' views support the policies of Patria's Board of Directors and management.
The group also continued developing the competitiveness and efficiency of its internal operations and invested in the development of procurement chain management to e.g. ensure the suppliers’ ethical conduct. Also a regular meeting with representatives of non-governmental organisations was arranged. Patria also put an emphasis on group communications and dialogue with its stakeholders to enhance openness and transparency.
During the financial period Patria continued the work to develop its ethical conduct. In addition to training of targeted groups also all Patria personnel completed an online training course on ethical conduct.
In April, Transparency International UK published the Defence Companies Anti-Corruption Index. Patria did well in the index, drastically improving its placing compared to the previous similar study.
A survey related to the practices currently applied to the management practices of environmental issues was conducted. The survey assessed the management of environmental issues in relation to legislation and the expectations and requirements set forth by the key stakeholders, taking account of foreseeable changes. The results will be utilized in the development of operations.
As part of Society’s Commitment to Sustainable Development, coordinated by the Ministry of the Environment, Patria pledged to develop the energy efficiency of the real estate we managed and to further enhance occupational safety in order to reduce the number of accidents at work.
Events after the financial period
After the financial year, in January 2016, Patria announced an important order for Patria AMV 8x8 wheeled vehicles from the UAE Armed Forces, a continuation of long-standing collaboration between the UAE Armed Forces and Patria. The vehicles are manufactured by Patria’s partner in Poland on a tight schedule.
In February 2016, the Turku Court of Appeal in its decision overturned the earlier judgment by the District Court and dismissed all bribery charges related to the Croatian export project. The state was ordered to compensate Patria for legal costs and the prolonged trial. The deadline for requesting right of appeal is 18 April 2016.
Outlook
The outlook for the Group's operations is expected to continue stable and the net sales for the year 2016 is expected to grow.
Patria’s domestic main customer, The Finnish Defence Forces, has significant projects in progress. These projects are extremely important to Patria and to Finland’s entire defence industry and its future. The development of the order stock depends on whether certain large export projects, now at the tendering stage, are launched on international markets. Internal action will be taken to increase the cost-effectiveness and flexibility of operations.
Further information:
The Annual Review for 2015 will be available after the Annual General Meeting to be held on 6 April 2016. The review will be available on Patria's website at www.patria.fi.
Chief Administration Officer Ville Jaakonsalo, p. 0500 881 070, [email protected]
Patria is a trusted provider of defence, security and aviation life-cycle support services and technology solutions. Patria has operations and projects in countries such as Finland, Sweden, Norway, Estonia, Poland, United Arab Emirates, USA and South Africa. Versatile duties employ today some 2,800 skilled professionals.
