Interim Report 1 January - 30 September 2003 

22 October 2003   8.30 am

Net sales: EUR 227.2 million (EUR 198.3 million)
Operating profit: EUR 26.6 million (EUR 21.0 million)
Earnings/share: EUR 1.02 (EUR 0.78)
Return on invested capital (ROI): 20.5% (17.2%)


NET SALES AND RESULTS

July-September gave the company its best quarterly financial results so far. Net sales totalled EUR 77.3 million (EUR 70.3 million). Operating profit was 16.0% (15.5%) of net sales, amounting to EUR 12.4 million against EUR 10.9 million last year.

Net sales for the nine-month period grew 14.6%. Corporate acquisitions accounted for 11 percentage points of this growth, while the remainder was organic growth. Profit for the period was up 30.2% and earnings per share rose to EUR 1.02 (EUR 0.78). Net sales grew faster than fixed costs. Integration of the four companies acquired during the review period has proceeded smoothly and facility investments carried out during the first six months of the year have reached their planned utilisation rate. Results for the same period last year were affected by one-off costs totalling around EUR 1.5 million.

Net sales by Environmental Services (waste management, recycling services, environmental products) increased by 11.6% and operating profit by 27.6%. Sales of waste management and recycling services went well and results improved for both product lines. Productivity in waste management remained at the good level already achieved. Productivity in recycling services improved because of higher volumes and increased efficiency at the plants. Investment in recycling operations will continue. Environmental products fell somewhat short of their targets.

Net sales by Property Services (property maintenance and cleaning services) were up 30.6% and operating profit up 37.6%. Property maintenance exceeded its targets substantially. Cooperation with institutional property owners developed favourably and net sales increased in maintenance of technical systems. The process of integrating SPS Siivouspalvelut, the company acquired at the beginning of the year, has proceeded smoothly. The improved results for both product lines were primarily due to the growth in net sales and the successful control of fixed costs.

Net sales by Industrial Services (hazardous waste management, industrial cleaning, damage repair services and sewer maintenance) were down 3.4%, but operating profit was up 12.9%. Of the individual product lines, hazardous waste management and sewer maintenance were both up. Net sales for damage repair services were down due to the fact that this year there have been no major damage repair contracts like last year's and that unprofitable business has been given up. Profitability improved in hazardous waste management, largely due to successful sales work and the introduction of the new physical/chemical treatment plant in the spring. Productivity and financial results improved for industrial cleaning, although net sales were down. In damage repair services, the corrective measures helped to produce the planned results.


FINANCING

Interest-bearing liabilities amounted to EUR 11.2 million more than a year earlier and to EUR 13.8 million more than at the end of the previous financial year. Interest-bearing net liabilities increased by only EUR 2.1 million, because cash reserves were unusually large. Net financial expenses were 1.3% of net sales and 11.1% of operating profit. EUR 5.0 million was tied up in working capital during the review period (EUR 2.8 million). The equity ratio was 38.9%(39.1%)and the gearing rate was 82.6 (91.6). Investments were financed out of cash flow from operations.


INVESTMENTS

Gross investments totalled EUR 25.4 million (EUR 22.7 million). The largest single investment was the acquisition of SPS Siivouspalvelut Oy, a cleaning company, at the beginning of the period. During the first half of the year two new recycling plants were started. In addition, machinery and equipment was replaced, production premises were bought and expanded and three minor corporate acquisitions made. The total annual net sales of the companies acquired during the period are EUR 18.2 million. Depreciation came to EUR 18.8 million.

After the review period, Lassila & Tikanoja has acquired A/S Hoetika ATU, the leading waste management company in Latvia. The net sales of Hoetika were EUR 7 million in 2002, and it employs 450 persons. The acquisition has come into force on 17 October 2003, and after that the acquired company operates under the name L&T Hoetika.


ADMINISTRATION

The Annual General Meeting held on 1 April, 2003, re-elected Heikki Hakala, Juhani Lassila and Juhani Maijala to the Board of Directors for the period 2003-2004. The Board of Directors comprises the following persons: Heikki Hakala, Lasse Kurkilahti, Juhani Lassila, Juhani Maijala and Soili Suonoja. Juhani Maijala is Chairman and Heikki Hakala Vice Chairman of the Board of Directors.

PricewaterhouseCoopers Oy, Authorized Public Accountants, were elected auditors. Principal Auditor is Heikki Lassila, Authorised Public Accountant.

AUTHORISATION FOR THE BOARD OF DIRECTORS

The Board of Directors is not authorised to effect any share issues or to launch a convertible bond or a bond with warrants. Neither is the Board authorised to decide on the repurchase nor disposal of the Company’s own shares.


COMPANY SHARES

The volume of trading in Lassila & Tikanoja plc shares on the Helsinki Exchanges from January through September was 3,512,614, which is 22.2% of the number of shares. The value of trading was EUR 60.7 million. The trading price varied between EUR 15.01 and EUR 21.00. The final trading price was EUR 20.00. The market capitalisation was EUR 316.5 million on 30 September 2003. The total number of shares is 15,826,308.

The AGM held on 9 April 2002 decided to issue stock options to key personnel of Lassila & Tikanoja and to a wholly-owned subsidiary of Lassila & Tikanoja plc. The Company shall issue a maximum of 400,000 stock options. Each stock option entitles its holder to subscribe for one share of Lassila & Tikanoja plc. To each share one voting right is attached. As a result of such share subscription, the number of shares of Lassila & Tikanoja plc may increase by a maximum of 400,000 new shares, which is 2.5% of the current total number of shares and voting rights.

So far the key persons have been entitled to subscribe for 130,000 2002A stock options and 126,000 2002B stock options. The share subscription price for the 2002A stock options is EUR 19.37. This subscription price has been reduced by the amount of the dividend for the year 2002 which exceeds 70% of the profit per share for the year. The subscription price for the 2002B stock options is the trade volume weighted average price of the Lassila & Tikanoja plc’s share on the Helsinki Exchanges in May 2003, rounded off to the nearest cent, EUR 17.69.


PROSPECTS FOR THE REST OF THE YEAR

Business prospects for the rest of the year remain favourable. The growth in net sales will slacken, however, due to the timing of corporate acquisitions in 2002. Results for the last quarter are expected to be of the same magnitude as last year despite the fact that pension costs will rise from the level of the last quarter of the previous year.

Net sales for the entire year will exceed slightly EUR 300 million and pre-tax profit is expected to be over EUR 28 million.


STATEMENT OF INCOME

* Taxes on the profit for the period under review.


BALANCE SHEET

KEY FIGURES

EVA = Operating profit – cost calculated on invested capital (average of four quarters)
* WACC = 9.0
** WACC = 9.5



CASH FLOW STATEMENT

FIGURES BY DIVISION

NET SALES

OPERATING PROFIT

QUARTERLY FIGURES

CONTINGENT LIABILITIES

DERIVATIVE CONTRACTS

The figures have not been audited.


Helsinki, 21 October 2003

LASSILA & TIKANOJA PLC
Board of Directors


Juhani Maijala
Chairman


For additional information please contact Mr Jari Sarjo,
President and CEO, tel. +358 10 636 2810.