HONKARAKENNE OYJ’S FINANCIAL STATEMENT RELEASE 1 JANUARY

HONKARAKENNE OYJ FINANCIAL STATEMENT RELEASE 15 February 2018 at 9:00 a.m.

HONKARAKENNE OYJ’S FINANCIAL STATEMENT RELEASE 1 JANUARY – 31 DECEMBER 2017

SUMMARY

Full-year net sales for 2017 were up 20 per cent on the previous year and amounted to MEUR 43.4. Operating profit was MEUR 1.7, a year-on-year increase of MEUR 2.5. At the end of the year, the Group’s order book stood at MEUR 23.0, 41 per cent higher than a year earlier.

July-December 2017

Honkarakenne Group's net sales for July-December amounted to MEUR 25.5 (MEUR 21.6 in 2016), a year-on-year increase of 18%.
The operating result was MEUR 1.8 (MEUR 1.3). Adjusted operating result was MEUR 1.8 (MEUR 1.4).
Profit before taxes was MEUR 1.8 (MEUR 1.4).
Earnings per share amounted to EUR 0.23 (EUR 0.23).

January-December 2017

Honkarakenne Group's net sales for January-December amounted to MEUR 43.4 (MEUR 36.1 in 2016), a year-on-year increase of 20%.
The operating result was MEUR 1.7 (MEUR -0.8). Adjusted operating result was MEUR 1.6 (MEUR -0.4).
Profit before taxes was MEUR 1.7 (MEUR -1.2).
Earnings per share amounted to EUR 0.15 (EUR -0.29).

The Board of Directors proposes to the Annual General Meeting that no dividend be paid for the financial year ending 31 December 2017.

In Honkarakenne’s view, net sales in 2018 will be higher and the profit before taxes will be better than in the previous year.

At the end of December, the Group's order book stood at MEUR 23.0, up 41% on the corresponding period of the previous year, when it stood at MEUR 16.3. The order book refers to orders whose delivery date falls within the next 24 months. Some orders may include terms and conditions relating to financing or building permits.

KEY INDICATORS	7–12/ 2017	7–12/ 2016	1-12/ 2017	1-12/ 2016

Net sales, MEUR	25.5	21.6	43.4	36.1
Operating profit/loss, MEUR	1.8	1.3	1.7	-0.8
Adjusted operating profit/loss, MEUR	1.8	1.4	1.5	-0.4
Profit/loss before taxes, MEUR	1.8	1.4	1.7	-1.2
Adjusted profit/loss before taxes, MEUR	1.8	1.5	1.6	-0.8
Average number of personnel	139	135	137	136
Personnel in person-years, average	124	111	117	110
Earnings/share (EPS), EUR *)	0.23	0.23	0.15	-0.29
Equity ratio, %			51	41
Return on equity, %			11	-20
Shareholders' equity/share, EUR *)			1.53	1.34
Gearing, %			5	75

*) Share-related key figures for the comparative periods have been adjusted for the share issue carried out in March 2017.

Marko Saarelainen, President and CEO of Honkarakenne Oyj, in connection with the financial statement release:

“We succeeded in increasing net sales in all business areas except for Russia & CIS. Net sales were substantially better than in the previous year. The bulk of net sales growth is generated by Finland and Asia. Finland accounted for 59 per cent of net sales.

We achieved growth because the Finnish construction market picked up. In addition it is apparent that customers value and are interested in healthy living. Public and care home construction has grown clearly. In addition in construction services it is seen that customers want to buy houses that are even more complete upon delivery. At the end of the review period, the company’s order book was 41 per cent higher than a year earlier.

In Russia & CIS, sales got off to a sluggish start in the first months of the year, but picked up towards the end of the year. In Global Markets, we were particularly delighted by our performance in Asia, where the sales trend was positive. Sales in Central Europe were disappointing.

We expanded our network of representatives during the year and are continuing to develop our distribution networks and are making outlays on project sales in all markets.”

NET SALES

Honkarakenne Group’s net sales for the year 2017 increased by 20 per cent to MEUR 43.4 (MEUR 36.1). In the second half of 2017 the Group’s net sales increased by 18 per cent to MEUR 25.5 (MEUR 21.6).

Geographical distribution of net sales:

DEVELOPMENT OF NET SALES
Distribution of net sales, %	1-12 /2017		1-12 /2016
Finland	59 %		51 %
Russia & CIS	22 %		28 %
Global Markets	19 %		21 %
Total	100 %		100 %

Net sales, MEUR	7-12 /2017	7-12 /2016		% change	1-12 /2017	1-12 /2016	% change
Finland	14.4	9.7		50 %	25.8	18.3	41 %
Russia & CIS	7.1	8.2		-12 %	9.4	10.2	-8 %
Global Markets	3.9	3.8		2 %	8.3	7.6	9 %
Total	25.5	21.6		18 %	43.4	36.1	20 %

Finland also includes billet sales and sales of by-products generated by the process for recycling.

Russia & CIS includes the following countries: Russia, Azerbaijan, Kazakhstan and other CIS countries.

Global Markets includes other countries than the above-mentioned.

At the end of December, the Group’s order book stood at MEUR 23.0. In the corresponding period of the previous year, it was MEUR 16.3. At the end of December, the order book was 41% better than a year earlier. Public and care home construction accounted for a substantial share of the growth in the order book. Exclusive of such construction, the order book was 11% better than in the previous year.

TRENDS IN PROFIT AND PROFITABILITY

The adjusted operating result for the July-December period was MEUR 1.8 (MEUR 1.4), the operating result was MEUR 1.8 (MEUR 1.3) and the result before taxes was MEUR 1.8 (MEUR 1.4). No adjustment items were recognised in the second half of 2017. During the corresponding period of the previous year, adjustment items included expenses of MEUR 0.1.

The full-year operating result for 2017 was MEUR 1.7 (MEUR -0.8) and the result before taxes MEUR 1.7 (MEUR -1.2). The adjusted operating result for 2017 was MEUR 1.5 (MEUR -0.4) and the adjusted result before taxes MEUR 1.6 (MEUR -0.8). Adjustment items include capital gains of MEUR 0.1 from the sale of property included in non-current assets, and adjustment items in the previous year included expenses of MEUR 0.4.

The development of the consolidated operating result was impacted by the year-on-year increase of 20% in net sales and the implementation of efficiency-boosting measures.

The Group’s operating result was impacted negatively by MEUR 0.3 (MEUR 0.0) allowance for doubtful trade receivables and impairment of MEUR 0.4 (MEUR 0.1) on plots included in inventory.

In addition, the year-on-year decline in financial expenses contributed positively to the result before taxes. Currency exchange gains of MEUR 0.2 (MEUR 0.1) and losses of MEUR 0.1 (MEUR 0.3) was recognised in financing income and expenses. Currency exchange gains and losses were caused mainly by fluctuation of Japanese yen during the financial year.

FINANCING AND INVESTMENTS

On 3 March 2017, the Board of Directors of Honkarakenne carried out a directed share issue to reinforce the company’s financial and balance sheet position, based on a share issue authorisation granted by the Annual General Meeting on 15 April 2016. In the directed issue, AKR-Invest Oy subscribed for 1,000,000 new Honkarakenne Series B shares. The subscription price was EUR 1.50/share, i.e. EUR 1,500,000 in total. The subscription price was paid in full and entered in the company’s invested unrestricted equity fund.

The Group's financial position was good at the end of the review period. The Group’s equity ratio stood at 51% (41%) and net financial liabilities at MEUR 0.4 (MEUR 5.0). In December, the company negotiated a new repayment plan for its largest single loan (a sum of MEUR 2.4). Some of the company’s loans include EBITDA and equity ratio covenants. These covenants apply to financial liabilities of MEUR 0.9.

Group liquid assets totalled MEUR 3.1 (MEUR 0.4). The Group also has a MEUR 5.4 (MEUR 5.4) bank overdraft facility, MEUR 0.3 of which had been drawn on at the end of the report period (MEUR 1.2). Gearing stood at 5% (75%).

The Group’s capital expenditure on fixed assets totalled MEUR 0.5 (MEUR 0.1) in year 2017.

PRODUCTS AND MARKETING

In Finland, net sales for the full-year rose by 41 per cent compared with the previous year. The company achieved substantial growth because the Finnish market picked up and public and care home construction got off to a good start. Demand for log-manufactured detached houses grew throughout the year. Demand for construction services has also been on the rise, as customers want to buy houses that are even more complete upon delivery. Healthy construction, high quality and design are important selling points in Finland. Honka’s interesting modern collections are based on the Zero Corner concept and non-settling logs. The overhauled Tuusula exhibition grounds were opened in the second half of the year. We expanded our network of representatives during the review year.

In Russia & CIS, sales got off to a sluggish start in the first months of the year, but picked up towards the end of the year. In spite of the pick-up in sales, it is forecast that the Russian market will remain difficult next year as well. Together with its local importer, Honka participated in the Astana World’s Fair, which took place in the summer. The 2500th Honka building was completed in Russia in 2017. It is located in the HonkaNova village, which was honoured as the Village of the Year 2017 in the Best of Elite Class (St. Petersburg). The construction of two new area development projects was started up in Russia. Sales of houses in projects that are under construction has continued in accordance with plans.

In Global Markets, the best sales performance was seen in Asia. The first Honka houses in China have been completed and the feedback from customers has been positive. Sales in Central Europe were disappointing. Due to weak volume, functions in this region are being reorganised. Marketing efforts in Global Markets focused on overhauling the website and harnessing social media more effectively. In addition, local marketing campaigns were carried out.

RESEARCH AND DEVELOPMENT

In 2017, R&D focused on improving the company’s current products and structural solutions. For instance, Honka developed solutions for compacting log frames and their connections for regions with extreme conditions. The Honka Healthy House^TM concept, which was developed in cooperation with the Allergy and Asthma Federation and certified by VTT, was expanded and its certification was extended.

The Group's R&D expenditure in January-December totalled MEUR 0.3 (MEUR 0.3), representing 0.6% of net sales (0.8%). The Group did not capitalise any development expenditure during the financial year.

PERSONNEL

In the review year, the Group employed a total of 117 people (110) on average in terms of person-years, a year-on-year increase of seven. The Group had an average of 137 (136) employees during the report year. At the end of the year, the Group had 138 (132) employees.

In summer 2016, the company conducted negotiations under the act on co-operation within undertakings to prepare itself for the cyclical variations typical of its field of business. As a result, it was agreed that the company could lay off clerical and managerial employees for a maximum of 90 days. It was also agreed that blue-collar workers would have shorter workweeks. The lay-off plan was effective until 31 March 2017 for white-collars and until 31 May 2017 for blue-collar workers.

In summer 2017, the company conducted negotiations under the act on co-operation within undertakings to prepare itself for the cyclical variations typical of its field of business. As a result, it was agreed that the company could lay off clerical and managerial employees for a maximum of 90 days. It was also agreed that blue-collar workers would have shorter workweeks. The lay-off plan is effective until 31 March 2018 for white-collars and until 31 April 2018 for blue-collar workers.

CHANGE IN MANAGEMENT

In April, Honkarakenne strengthened its Executive Group with three new members: Leena Aalto was appointed as Vice President – Finance, CFO, Jari Fröberg was appointed as Vice President – Production and Jari Noppa was appointed as Vice President – Consumer Business, Finland.

In November, Tanja Rytkönen, Honkarakenne’s Vice President – Design, resigned to join another company’s employ. Tanja Rytkönen stepped down from the Executive Group immediately after resigning.

SHARE ISSUE, SHARES AND OWN SHARES

Honkarakenne published a listing prospectus approved by the Financial Supervisory Authority for the shares subscribed in the directed share issue carried out in July. The new shares were added for trading to the list of the Helsinki Stock Exchange (Nasdaq OMX Helsinki Oy) on 11 July 2017, together with the company’s existing Series B shares under the ticker symbol HONBS.

Share-related key figures for the comparative periods have been adjusted for the share issue carried out in March 2017.

At the end of the review period, the total number of Honkarakenne Oyj shares amounted to 6,211,419, of which 300,096 were Series A shares and 5,911,323 Series B shares. The company’s share capital remained unchanged and was EUR 9,897,936.00. Each B share carries one (1) vote and each A share carries twenty (20) votes. Hence, Honkarakenne’s shares in aggregate at the end of the review period carried a total of 11,913,243 votes.

Honkarakenne’s Series B shares are quoted on the Small Caps list of NASDAQ OMX Helsinki Ltd under the ticker symbol HONBS. The share price at the balance sheet date was EUR 3.61. The highest price of the share in trading was EUR 3.92 and the lowest EUR 1.55. Market capitalisation at the end of the financial year amounted to MEUR 21.11 (the value of the Series B shares has been used for the value of Series A shares). In 2017, turnover of quoted Series B shares amounted to MEUR 10.88, with 3.7 million shares traded.

In April, Honkarakenne Oyj announced that S-Bank would cease offering liquidity providing services and that S-Bank had terminated the market making agreement for Honkarakenne Oyj’s shares effective 31 May 2017. At that time, the company also announced that in its view the liquidity of the share is sufficient without the liquidity provider.

Honkarakenne has not acquired its own shares during the report period. At the end of the report period, the Group held 364,385 of its Honkarakenne B shares with a total purchase price of EUR 1,381,750.23. At the end of report period these shares represent 5.87% of the company's all shares and 3.05% of all votes. The purchase cost has been deducted from shareholders' equity in the consolidated financial statements.

RESULT OF THE VOLUNTARY PUBLIC CASH TENDER OFFER FOR SHARES IN SISTEMA FINANCE S.A.

Sistema Finance S.A. announced the preliminary results of the voluntary public cash tender offer made in year 2016 for all shares in Honkarakenne Oyj on 20 January 2017 and the final results on 24 January 2017. According to Sistema Finance S.A.’s announcement, 192,866 Series B shares were tendered in the offer, representing 3.7 per cent of Honka shares. Sistema Finance S.A. announced that it would not complete the tender offer in accordance with its terms and conditions, as it was contingent on the acquisition of at least 67 per cent or more of the Series A and Shares B shares in Honka.

HONKARAKENNE OYJ’S 2017 ANNUAL GENERAL MEETING, BOARD OF DIRECTORS, AND AUDITORS

The Annual General Meeting of Honkarakenne Oyj was held at Järvenpää-talo in Järvenpää on 7 April 2017. The AGM approved the parent company's and the consolidated Financial Statements, and discharged the members of the Board of Directors and the CEO from liability for 2016. The AGM decided not to pay a dividend for the 2016 financial year.

Anita Saarelainen was re-elected to the company's Board of Directors. Timo Kohtamäki, Arimo Ristola and Kyösti Saarimäki were elected as new members. At the Board's constituent meeting, Arimo Ristola was elected Chairman of the Board. At the same meeting, the Board decided not to establish any committees.

PricewaterhouseCoopers Oy, member of the Finnish Institute of Authorised Public Accountants, was re-appointed as auditor of the company, with Maria Grönroos, APA, as chief auditor.

AUTHORISATIONS OF THE BOARD OF DIRECTORS

On 7 April 2017, the AGM decided that the Board of Directors will be authorised to acquire a maximum of 400,000 of the company’s own B shares with assets included in the company’s unrestricted equity. In addition, the AGM authorised the Board to decide on a rights issue or bonus issue and on granting special rights to shares referred to in Section 1 of Chapter 10 of the Limited Liability Companies Act in one or more instalments. By virtue of the authorisation, the Board may issue a maximum total of 1,500,000 new shares and/or relinquish old B shares held by the company, including those shares that can be issued by virtue of special rights. Both authorisations will remain in force until the next Annual General Meeting, however expiring at the latest on June 30, 2018.

CORPORATE GOVERNANCE

Honkarakenne Oyj follows the Limited Liability Companies Act and the Finnish Corporate Governance Code 2015 (effective from 1 Jan 2016) for listed companies issued by the Finnish Securities Market Association. The company’s website, www.honka.com, provides more information on the corporate governance systems.

FORTHCOMING RISKS AND UNCERTAINTIES

Russia is one of Honkarakenne’s major business territories. The sanctions connected to the Ukrainian situation and strong exchange rate fluctuations cause instability in the Russian market. This might also have significant effects on Honkarakenne’s business.

Deferred tax assets include an item of MEUR 0.9 related to unused tax losses, of which MEUR 0.6 will expire in 2023 - 2025. In Honkarakenne’s view, these deferred tax assets can be utilised by using the company’s estimated taxable income, which is based on Honkarakenne’s business plans. If earnings do not develop as expected in the long term, it is possible that the tax assets might not be utilised in time and must be impaired. The company did not recognise new deferred tax assets in the balance sheet in 2017.

To maintain its solvency, Honkarakenne depends on good cash flow. Honkarakenne has an MEUR 5.4 overdraft facility for short-term capital requirements. On the balance sheet date 31 December 2017, MEUR 0.3 million of this facility was in use. Overdraft is recognized in non-current liabilities, as these are not short-term repayment obligation.

The assessment of amounts in the balance sheet is based on current assessments by the management. If these assessments are changed, this may result in changes to the company’s result.

REPORTING

This report contains statements that relate to the future, and these statements are based on hypotheses that the company's management hold currently as well as on the decisions and plans that are currently in place. Although the management believes that the hypotheses relating to the future are well-founded, there is no guarantee that the said hypotheses will prove to be correct.

This financial statements release has been prepared in line with standard IAS 34, Interim Financial Reporting. In preparing this financial statements release, Honkarakenne has observed the same preparation principles as in its annual financial statements. The financial statement release should be read together with the 2016 financial statements. The new revised standards and interpretations effective as of 1 January 2017 have no bearing on the figures presented for the report period.

Share-related key figures for the comparative periods have been adjusted for the share issue carried out in March 2017.

As from the 2016 half-year financial report, Honkarakenne started complying with the Guidelines on Alternative Performance Measures (APM) issued by the European Securities and Markets Authority (ESMA). An APM is a financial measure of performance other than a financial measure defined or specified in IFRS. For this guidelines, the term “adjusted” is used instead of “without non-recurring items”. As adjustment items, the company classifies significant business transactions that are considered to affect comparisons of business operations between different reporting periods. Such transactions include significant reorganisation expenses, significant impairment losses on non-current assets or reversals thereof, significant capital gains and losses on assets, and other significant non-customary income or expenses.

The figures have not been examined by the auditor.

PROPOSAL OF THE BOARD OF DIRECTORS ON THE USE OF PROFIT FUNDS

The parent company has no distributable funds and no funds can be allocated as profits. The parent company posted profit of MEUR 0.8 for the financial year.

The Board of Directors proposes to the Annual General Meeting that no dividend be paid for the financial year ending 31 December 2017.

THE OUTLOOK FOR 2018

In Honkarakenne’s view, net sales in 2018 will be higher and the profit before taxes will be better than in the previous year.

ANNUAL GENERAL MEETING

Honkarakenne Oyj’s Annual General Meeting will be held on Friday, 13 April 2018 from 14:00 onwards in Karstula.

HONKARAKENNE OYJ

Board of Directors

Further information:

Marko Saarelainen, President and CEO, tel. +358 (0)40 542 0254, marko.saarelainen@honka.com or

Leena Aalto, Vice President - Finance, CFO, tel. +358 (0)40 769 4590, leena.aalto@honka.com

This and previous releases are available for viewing on the company’s website at www.honka.com.

During week 12, Honkarakenne will publish the Board of Directors’ Report and the complete Financial Statements for 2017, as well as a separate Corporate Governance Statement on the company’s website at www.honka.com. The half year financial report for 2018 will be published on 9 August 2018.

DISTRIBUTION

NASDAQ OMX Helsinki

Key media

Financial Supervisory Authority

www.honka.com

Under its Honka® brand, Honkarakenne manufactures high-quality, healthy and ecological detached houses, holiday homes and public buildings using Finnish solid wood. The company has delivered 85,000 buildings to more than 50 countries. House packages are made at the company’s own factory in Karstula, Finland. In 2017, the Honkarakenne Group had net sales of MEUR 43.4, of which exports accounted for 41%. www.honka.com

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited	7-12 /2017	7-12 /2016	1-12 /2017	1-12 /2016
MEUR

Net sales	25.5	21.6	43.4	36.1
Other operating income	0.2	0.2	0.5	0.4
Change in inventories	0.5	-1.0	1.5	-0.2
Work performed for own purposes and capitalised	0.2	0.0	0.2	0.0
Materials and services	-17.5	-12.5	-30.2	-23.0
Employee benefit expenses	-3.5	-3.2	-6.9	-6.7
Depreciations and amortisation	-0.9	-0.9	-1.7	-1.8
Other operating expenses	-2.8	-3.0	-5.1	-5.5
Operating profit/loss	1.8	1.3	1.7	-0.8
Financial income	0.1	0.0	0.3	0.2
Financial expenses	-0.1	0.0	-0.3	-0.5
Share of associated companies' result	0.1	0.0	0.1	0.0
Profit/loss before taxes	1.8	1.4	1.7	-1.2
Taxes	-0.5	-0.2	-0.8	-0.3
Profit/loss for the period	1.3	1.1	0.9	-1.4

Other comprehensive income
Translation differences	-0.0	-0.2	-0.1	0.1
Total comprehensive income for the period	1.3	1.0	0.8	-1.3

Result for the period attributable to
Equity holders of the parent	1.3	1.1	0.9	-1.4
Non-controlling interest	0.0	-0.0	0.0	-0.0
	1.3	1.1	0.9	-1.4
Comprehensive income attributable to
Equity holders of the parent	1.3	1.0	0.8	-1.3
Non-controlling interest	0.0	-0.0	0.0	-0.0
	1.3	1.0	0.8	-1.3
Calculated from the result for the period attributable to equity holders of parent Earnings/share (EPS):
Basic, EUR *)	0.23	0.23	0.15	-0.29
Diluted, EUR *)	0.23	0.23	0.15	-0.29

Honkarakenne Oyj has two series of shares: A shares and B shares, which have different right to dividend. Profit distribution of 0.20 EUR per share will be paid first for B shares, then 0.20 EUR per share for A shares, followed by equal distribution of remaining profit distribution between all shares.

*) Figures for the comparative periods have been adjusted for the share issue carried out in March 2017

CONSOLIDATED BALANCE SHEET Unaudited	31.12.2017	31.12.2016
MEUR

Assets
Non-current assets
Property, plant and equipment	8.5	9.6
Goodwill	0.1	0.1
Other intangible assets	0.1	0.1
Investments in associated companies	0.2	0.2
Receivables	0.1	0.1
Deferred tax assets	2.0	2.6
	11.1	12.7
Current assets
Inventories	5.3	4.0
Trade and other receivables	2.6	2.8
Tax receivable, income tax	3.1	0.4
	11.0	7.2
Total assets	22.1	19.9

Shareholders’ equity and liabilities	31.12.2017	31.12.2016

Equity attributable to equity holders of the parent company
Share capital	9.9	9.9
Share premium account	0.5	0.5
Fund for invested unrestricted equity	8.0	6.5
Own shares	-1.4	-1.4
Translation differences	0.0	0.1
Retained earnings	-8.1	-9.0
	9.0	6.7
Non-controlling interests	0.0	0.0
Total equity	9.0	6.7

Non-current liabilities
Deferred tax liability	0.1	0.0
Provisions	0.2	0.2
Financial liabilities	2.4	4.5
	2.7	4.6
Current liabilities
Trade and other payables	8.9	7.5
Current tax liabilities	0.2	0.0
Provisions	0.2	0.2
Current financial liabilities	1.2	0.9
	10.5	8.6
Total liabilities	13.1	13.3
Total equity and liabilities	22.1	19.9

STATEMENT OF CHANGES IN EQUITY
abridged
Unaudited

EUR thousand

Equity attributable to equity holders of the parent

Total

Total equity

Total equity
1.1.2016

9898

520

6534

-27

-1382

-7757

7786

204

7990

Profit/loss for the period

-1433

-3

-1436

Translation difference

124

Purchase of non-controlling interests

197

-197

Total equity 31.12.2016

9898

520

6534

-1382

-8993

6674

6678

Equity attributable to equity holders of the parent

Total

Total equity

Total equity
1.1.2017

9898

520

6534

-1382

-8993

6674

6678

Profit/loss for the period

870

Translation difference

-91

Directed issue

1500

Total equity 31.12.2017

9898

520

8034

-1382

-8123

8953

8957

a) Share capital

b) Share premium account

c) Fund for invested unrestricted equity

d) Translation difference

e) Own shares

f) Retained earnings

g) Non-controlling interests

CONSOLIDATED STATEMENT OF CASH FLOWS abridged Unaudited	1.1.- 31.12.2017	1.1.- 31.12.2016
MEUR
Cash flow from operating activities	3.5	0.5
Cash flow from investing activities, net	-0.4	1.1
Total cash flows from financing activities	-0.3	-2.2
Proceeds from share issue	1.5	0.0
Proceeds from borrowings	0.0	0.3
Repayment of borrowings	-1.8	-2.5
Other financial items	-0.0	-0.0

Change in cash and cash equivalents	2.8	-0.7
Cash and cash equivalents at the beginning of period	0.4	1.1
Cash and cash equivalents at the close of period	3.2	0.4

NOTES TO THE REPORT

Accounting policies

Share-related key figures for the comparative period have been adjusted for the share issue carried out in March 2017.

In Honkarakenne’s view, Alternative Performance Measures provide significant additional information to management, investors, securities analysts and other parties on Honkarakenne’s result of operations, financial position and cash flows, and are frequently used by analysts, investors and other parties. Return on equity, equity ratio, net financial liabilities and gearing are presented as supplementary key figures, as in the company’s view they are useful indicators for assessing Honkarakenne’s ability to acquire financing and pay its debts. In addition, gross investments and R&D expenditure provide additional information on needs related to Honkarakenne’s cash flow from operating activities.

Honkarakenne has three geographical operating segments that have been combined into one segment for reporting purposes. Geographically, sales are divided as follows: Finland & Baltics, Russia & CIS and Global Markets. The internal reporting of the management is in line with IFRS reporting. For this reason, separate reconciliations are not presented.

PROPERTY, PLANT AND EQUIPMENT
Unaudited	Property,
MEUR	plant and equipment

Cost 1.1.2017	48.3
Increase	0.5
Disposals	-0.2
Cost 31.12.2017	48.6

Accumulated depreciation 1.1.2017	-38.7
Accumulated depreciation of disposals	0.2
Depreciation for the period	-1.6
Accumulated depreciation 31.12.2017	-40.0

Carrying amount 1.1.2017	9.6
Carrying amount 31.12.2017	8.5

Own shares

Contingent liabilities

Unaudited	31.12.2017	31.12.2016
MEUR
For own loans
- Mortgages	17.4	17.4
- Other quarantees	2.4	2.3
Rental liabilities	0.0	0.1
Leasing liabilities	0.2	0.1
Derivative contracts	0.0	0.1
Nominal values of forward exchange contracts	0.0	2.2

Events with related parties

The Group’s related parties consist of subsidiaries and associated companies; the company's management and any companies in which they exert influence; and those involved in the Saarelainen shareholder agreement and any companies controlled by them. The management personnel considered to be related parties comprise the Board of Directors, President & CEO, and the company's Executive Group. The pricing of goods and services in transactions with related parties conforms to market-based pricing.

During the financial year, ordinary business transactions with related parties were made as follows: sales of goods and services to related parties amounted to MEUR 0.3 (MEUR 0.3 thousand a year earlier) and purchases from related parties to MEUR 0.5 (MEUR 0.4). Financial statements include MEUR 0.4 (MEUR 0.4) liabilities to the related parties and MEUR 0.0 (MEUR 0.1) receivables from the related parties. Credit losses of EUR 18 thousand have been recognised for related parties (no such credit losses were recognised in the previous year).

As part of Honkarakenne’s financial arrangements, the main shareholder of Honkarakenne, Saarelainen Oy, granted Honkarakenne Oyj an unsecured junior loan amounting to MEUR 0.3 in November 2016. The junior loan is subordinated to bank loans.

In 2010 and 2011, the parent company Honkarakenne Oyj granted a long-term loan totalling MEUR 0.9 to Honka Management Oy. Impairments totalling MEUR 0.4 were recognised for this loan in 2014-2015; these impairments were reversed in 2017. This has no effect on the Group’s Consolidated Financial Statements.

Key figures
		1-12/	1-12
Unaudited		2017	2016

Earnings/share (EPS)*)	euro	0.15	-0.29

Return on equity	%	11	-20

Equity ratio	%	51	41

Shareholders equity/share *)	euro	1.53	1.34

Net financial liabilities	MEUR	0.4	5.0

Gearing	%	5	75

Gross investments	MEUR	0.5	0.1
	% of net sales	1	0

Order book	MEUR	23.0	16.3

Average number of personnel	White-collar	71	67
	Blue-collar	66	69
	Total	137	136

Personnel in person-years, average	White-collar	67	62
	Blue-collar	50	48
	Total	117	110

Adjusted number of shares (’000) *)	At period-end	5847	4847
	Average during period	5677	4989

*) Share-related key figures for the comparative period have been adjusted for the share issue carried out in March 2017.

Own shares held by the Group are excluded from the number of shares.

Calculation of key figures

	Profit / loss for the period attributable to equity holders of parent
Earnings/share (EPS):	------------------------------------------------
	Average number of outstanding shares

	Profit / loss before taxes – taxes
Return on equity %:	------------------------------------------------	x 100
	Total equity, average

	Total equity
Equity ratio, %:	------------------------------------------------	x 100
	Balance sheet total - advances received

Net financial liabilities:	Financial liabilities – cash and cash equivalents

	Financial liabilities – cash and cash equivalents
Gearing, %:	------------------------------------------------	x 100
	Total equity

	Shareholders’ equity
Shareholders equity/share:	------------------------------------------------
	Number of outstanding shares at the close of period