Patria’s Financial Review for 2017 – preliminary data
Patria Group's sales and profitability for the financial year 2017 decreased from the previous year. The Group’s net sales for the financial period totalled EUR 467.7 million and was 4.5% less than in 2016 (EUR 489.9 million). Defence material and maintenance accounted for 94% (95%) and civilian products for 6% (5%) of the net sales. Sales outside Finland accounted for 33% (41%) of the net sales.
The Group’s operating profit for the financial period was EUR 33.9 million, representing 7.2% of the net sales (EUR 74.6 million, 15.2%). The consolidated income before taxes amounted to EUR 31.3 million (EUR 71.7 million). The Group’s return on equity was 10.4% (26.2%). The decrease in operating profit is mainly due to the large Land business projects causing annual fluctuation and due to an arbitration judgement related to the offset agreement dispute with the state of Poland. Certain large export projects ended in year 2016 or in the beginning of 2017 while the new international projects still are in the tendering stage.
The value of new orders received during the financial period was EUR 309.5 million (EUR 268.5 million). Defence material and life cycle support accounted for 92% (88%) and civilian products for 8% (12%) of the new orders. At the end of December, the Group’s order stock was EUR 691.4 million (EUR 857.7 million).
Major events in 2017
In accordance with the renewed strategy, Patria continues to provide its aerospace and military customers with equipment availability and continuous performance development. The aim is to further expand life-cycle support services in various defence sectors and in international helicopter maintenance services in Northern Europe. Another growing area is the system and integration business – especially in the area of C4ISTAR.
Successful implementation of the new strategy calls for an agile way of working. Therefore, group-level employee co-operation negotiations were started in order to reduce the parent company’s role in providing group-level support functions and to focus more into implementation of the new strategy in the business units.
During the financial year Patria had an active role as a strategic partner of the Finnish Defence Forces assisting in the HX Fighter Program. Patria has worked intensively for preparing the Squadron 2000 project, awarded to Patria in the beginning of the 2018.
In February, Patria purchased five training aircraft and two flight training simulators from the Austrian manufacturer Diamond Aircraft Industries GmbH. Patria Pilot Training continued as a training partner of the Finnish Aviation Academy at its new training base at Tampere-Pirkkala Airport. Also, Patria and the American company S&K Logistic Services signed a teaming agreement to offer landing gear overhaul to F/A-18 customers.
In March, Patria Pilot Training and Nordic Regional Airlines signed an agreement on ab-initio pilot training. Patria and Schiebel announced their co-operation, where they have been working together to integrate Patria’s sophisticated Compact Airborne Networking Data Link (CANDL) communication network onto the CAMCOPTER® S-100 Unmanned Air System (UAS).
In April, Norwegian Defence Logistics Organisation (NDLO) selected Patria to supply on-aircraft maintenance for the Norwegian NH90 helicopters. The scope of the contract covers phase and calendar inspections, associated repairs and maintenance for the Norwegian NH90 NFH Helicopters.
In May, the Finnish military aviation authority handed over the Military Designs Organisation Approval (MDOA) based on the European Defence Agency’s European Military Airworthiness Requirements (EMAR) to Patria, which is the first organization to receive the approval in Finland. Patria AMV28A armoured wheeled vehicle completed successfully the swimming tests organised in the end of the month in Finland.
In June, Patria received four new Diamond DA40 NG training aircraft related to the purchase of five training aircraft and two flight training devices.
In August, Patria signed a contract for a series of CANDL (Compact Airborne Networking Data Link) terminals, HPA high power amplifiers and related services to be delivered to Airbus Defence & Space in Germany.
In September, Patria won the competition and signed a contract with the Norwegian Defense Logistics Organisation (NDLO) for the maintenance of the Norwegian Armed Forces’ Bell 412 helicopters.
In October, the Defence Minister authorised the Finnish Defence Forces to sign a Letter of Intent and Pre-design Activities Contract with Patria concerning the Squadron 2000 Mid-Life Upgrade (MLU). Patria also signed an agreement with Mootor Grupp to acquire their share of 60 % of the largest defence maintenance contractor in Estonia - Milrem LCM OÜ.
In November the Slovak and Finnish Ministries of Defence agreed on a joint 8x8 infantry fighting vehicle (IFV) development programme, and Patria was selected to deliver a new prototype version of AMVXP 8x8 chassis as part of the programme. Patria was also awarded the Innovation of the Year Award for the Patria Nemo Container at the Future Mortar Systems conference in London.
During the year, Patria attended several major defence industry events, e.g. IDEX 2017 in Abu Dhabi, Bulgarian Defence Industry Club Conference 2017 and DSEI in London.
The beginning of 2018
In January 2018 Patria signed an agreement with the Finnish Defence Forces on the mid-life upgrade and overhaul of the Finnish Defence Forces’ Hamina Class fast attack craft. The total value of the delivery contract, without options, is around 170 million euros (excluding VAT).
Kongsberg Defence & Aerospace and Patria agreed to develop opportunities for cooperation on Missile Systems. The agreement comprises the establishment of a Missile Competence Center in Finland, Open Tactical Framework (OTF) core technologies and system architecture software for missile programs in Finland and international opportunities linked to these capabilities.
The Centre for Defence Investment in Estonia renewed the public contract with Milrem LCM, provider of defence vehicle lifecycle management, for repair and maintenance of the Patria XA-180 and XA-188 armoured vehicles. Milrem LCM is part of Patria Group.
Responsibility and transparency of operations
In 2017, Patria updated its Code of Conduct, continued the ethical online training for the personnel and created the new social responsibility policy. The group also continued its work related to the Society’s Commitment to Sustainable Development coordinated by the Ministry of 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 continued to support third-sector work to prevent social exclusion of young. The group 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.
Patria supported the national Sleep Easy project, which was organised by the Finnish voluntary defence organisation and which intended to increase general awareness of overall security and motivate citizens, especially the youth to engage in voluntary defence and security efforts. The project was a part of Finland’s Centennial Year programme with the status of an extensive cooperation project.
Outlook
Patria’s domestic customer, the Finnish Defence Forces, has significant projects (HX, SQ 2020) in progress. Industrial participation in these projects is extremely important and a great opportunity to Patria.
General development and changes in the security environment have increased the growth of defence budgets, and this will affect the international defence business with a delay.
The development of the order stock depends to large extent on whether certain large Land export projects, now at the tendering stage, are launched on international markets.
Further information:
The Annual Review for 2017 will be available after the Annual General Meeting on 23 March 2018 at www.patria.fi.
Chief Financial Officer Ville Jaakonsalo, p. +358 500 881 070, [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.
www.patria.fi
