Balance sheet, cash flow and and financing

Balance sheet and financing 31 Dec 2015 31 Dec 2014 Change
Key figures, balance sheet

Equity ratio, %* 40.6 37.1
Gearing, %** 33.6 51.8
Return on investment, rolling 12 months, %*** 10.2 13.5
Return on capital employed, rolling 12 months, %**** 5.3 4.5
Capital invested, EUR million 632.3 760.3 -128.0
Operating capital, EUR million 474.8 590.4 -115.6
Net working capital, EUR million 258.7 335.1 -76.4
Financial position and liquidity

Interest-bearing debt, EUR million 254.7 347.8 -93.1

- of which long-term liabilities, EUR million 123.1 139.5 -16.4

- of which short-term liabilities, EUR million 131.6 208.3 -76.7
Liquid funds, EUR million 127.9 134.2 -6.3
Interest-bearing net debt, EUR million 126.8 213.6 -86.8
Committed, unused credit limits, EUR million 185.0 185.0 0
Unused overdraft limits, EUR million 12.3 33.2 -20.9

* If the hybrid bonds were recognised as debt, the equity ratio would be: 12/2015: 28.6% and 12/2014: 24.6%.

** If the hybrid bonds were recognised as debt, gearing would be: 12/2015: 89.6% and 12/2014: 128.4%.

*** Includes the effect of discontinued operations

**** Calculation: Operating profit, rolling 12 months / (Total equity (quarterly average) + interest-bearing liabilities (quarterly average)) x 100

On 31 December 2015, the balance sheet total was EUR 1,035.5 million (1,257.8), of which shareholders’ equity accounted for EUR 377.6 million (412.5). Shareholders’ equity includes EUR 111.6 million (138.4) in hybrid bonds. In the second quarter, the Group completed a partial repurchase of its EUR 70 million hybrid bond issued in 2012 by repurchasing notes to a nominal amount of EUR 27.1 million in exchange for cash. The Group is entitled to redeem the remaining EUR 42.9 million hybrid bond in March 2016. The Group also issued a EUR 70 million hybrid bond in 2014, which it is entitled to redeem in March 2018.

The Group’s operating capital on 31 December 2015 amounted to EUR 474.8 million (590.4). The change from the previous year is attributable to decreased investments, the sale of tangible assets and a reduction in net working capital. At the end of the review period, net working capital stood at EUR 258.7 million (335.1). Net working capital was reduced by decreasing housing start-ups in Russia and Finland, improving invoicing efficiency, increasing the use of factoring and improving inventory turnover in the Paving segment, among other things.

Interest-bearing debt at the end of the period amounted to EUR 254.7 million (347.8) and interest-bearing net debt totalled EUR 126.8 million (213.6). Strong cash flow from operating activities has impacted the net debt favourably. In addition, debt has been reduced by divesting assets. Long-term interest-bearing debt accounted for 48% (40) of the loan portfolio at the end of the period. Liquid funds totalled EUR 127.9 million (134.2). Of the company’s interest-bearing debt, EUR 104.1 million (127.1) comprises borrowings of housing and commercial property companies included in inventory, EUR 99.7 million (99.6) bonds, EUR 13.1 million (63.4) commercial papers, EUR 34.8 million (50.2) finance lease liabilities and EUR 3.0 million (7.5) other financial liabilities. In addition, the company had unused credit facilities worth EUR 185.0 million (185.0) and overdraft limits worth EUR 12.3 million (33.2) at the end of the period. Of all interest-bearing debt, 55% (41) was at a fixed interest rate.

Net finance costs decreased, amounting EUR 20.6 million (37.9) in January–December. The finance costs for 2015 were reduced by a decrease in interest expenses and currency hedging costs compared to 2014, among other things. In addition, the figures for the comparison period were negatively impacted by, for instance, a EUR 7 million write-down of loan receivables made in the third quarter, related to the divestment of Lemcon Networks’ businesses in the Americas, as well as the costs of renegotiated credit limits and the negative valuation of interest rate derivatives as a result of lower interest rates. The interest expenses of the hybrid bonds are not recorded under finance costs in the income statement; instead, their impact can be seen in earnings per share and changes in equity.

Cash flow from operating activities amounted to EUR 106.6 million (-48.4) in January–December. Changes in working capital strengthened the cash flow for January–December. The company has, among other measures, adjusted its housing production in Russia and improved invoicing efficiency. The Q1/2014 cash flow includes the payment of EUR 59.7 million in damages related to the asphalt cartel.