Powerflute Oyj : Interim Results

16 August 2016

Powerflute

Unaudited Interim Results

For the six months ended 30 June 2016

Powerflute Oyj ('Powerflute' or the 'Group') today announces its unaudited interim results for the six-month period ended 30 June 2016.

HIGHLIGHTS

Results excluding non-recurring items

· Revenues decreased to €176.1 million (2015: €179.7 million)

· EBITDA from operating activities was €26.5 million (2015: €26.5 million)

Results including non-recurring items

· EBITDA from operating activities was €26.5 million (2015: €24.0 million)

· Operating profit increased to €21.6 million (2015: €21.1 million)

· Profit before tax increased to €18.5 million (2015: €18.2 million)

· EPS increased to 4.5 cents per share (2015: 4.3 cents)

· Net debt of €42.9 million (€37.1 million at 31 December 2015)

· Refinancing of €120 million borrowing facilities agreed in July 2016 will result in a significant reduction in net interest expenses

Segmental performance excluding non-recurring items

· Coreboard and Cores

− Revenues increased to €106.1 million (2015: €105.4 million)

− EBITDA from operating activities increased to €15.2 million (2015: €12.2 million)

· Packaging Papers

− Revenues decreased to €69.9 million (2015: €74.3 million)

− EBITDA from operating activities reduced to €11.4 million (2015: €14.5 million)

(1) Non-recurring items in the period ended 30 June 2015 included restructuring costs and other costs related to the acquisition of Corenso in December 2014 and a gain arising on the sale of shares in Kotkamills in March 2015. There were no non-recurring items in the period ended 30 June 2016.

Commenting on the results, Dermot Smurfit, Chairman of Powerflute said:

'I am pleased to report that the Group has continued to perform well during the first half of the year. The integration of the Corenso businesses acquired in December 2014 is now substantially complete and our Coreboard and Cores division has delivered an increase in profits compared with the prior year as the benefits of operational initiatives launched in 2015 are now being realised. In Packaging Papers, a decision to implement the planned annual maintenance shutdown during the first half of the year together with more challenging market conditions resulted in profits below the record performance achieved in 2015.'

'Markets are expected to remain competitive throughout the second half of the year. Despite this, we expect to make further progress with operational improvement initiatives in both Coreboard and Cores and Packaging Papers and expect that the Group will continue to perform well for the remainder of the year.'

For further information, please contact:

About Powerflute

Powerflute is a paper and packaging group quoted on the AIM market of the London Stock Exchange (Ticker: POWR)which seeks to acquire businesses with strong fundamentals whose performance can be improved through a combination of management focus and targeted investment.

The Group has two main activities; Packaging Paperswhich trades under the name Powerflute and operates a paper mill in Kuopio, Finland producing a specialised form of Nordic semi-chemical fluting used in the manufacture of high-performance corrugated board; and Coreboard and Cores, which trades under the name Corenso and is a leading international manufacturer of high performance coreboard and cores, with coreboard mills in the United States and Europe and a network of core producing facilities in Europe, North America and China.

Nordic semi-chemical fluting is made from locally sourced birch, and boxes manufactured using it demonstrate superior strength and moisture resistance and are used for transportation of fruit and vegetables, high-value industrial goods such as electrical appliances and automotive components. The Kuopio mill is one of only three suppliers of Nordic semi-chemical fluting in Europe.

Cores and coreboard are manufactured from recycled paper and are used for applications in paper, packaging, textiles, steel, aluminium and many other industries. Coreboard and cores produced by Corenso demonstrate superior strength and rigidity and are suitable for use in the most demanding applications.

For further information, please visit www.powerflute.com.

CHAIRMAN'S STATEMENT

I am pleased to report that the Group has continued to perform well during the first half of the year, achieving revenues and profits broadly in line with the same period of the prior year despite encountering tougher market conditions. Further progress has been made in the Coreboard and Cores activity and the Packaging Papers continued to perform well despite increased competitive pressure.

Results

Revenue for the six months ended 30 June 2016 decreased to €176.1 million (2015: €179.7 million). EBITDA from operating activities before non-recurring items was unchanged at €26.5 million (2015: €26.5 million). Profit before tax increased to €18.5 million (2015: €18.2 million) and Basic EPS increased compared with the prior year to 4.5 cents per share (2015: 4.3 cents per share).

In Coreboard and Cores, operational improvement initiatives launched in 2015 are delivering the expected benefits and this, together with improvements in the effectiveness of sales and marketing activities, contributed to an increase in profits compared with the prior year. In Packaging Papers, a decision to take the planned annual maintenance shutdown during the first half of the year and the impact of more challenging conditions on pricing and volumes resulted in profits below the record performance achieved in 2015. The integration of the Corenso businesses acquired in December 2014 is now substantially complete and the major IT project launched in mid-2015 is progressing in line with our expectations with the first sites already live on the new systems.

There were no non-recurring items to report for the six months ended 30 June 2016. Non-recurring items in the six months ended 30 June 2015 were €0.4 million, including costs of €2.5 million related to the integration and restructuring of Corenso, offset by a gain of €2.1 million on the sale of the Group's investment in Kotkamills Oy.

Cash flow and liquidity

The net cash outflow for the period was €5.8m (2015: €9.5 million inflow). This reflected the impact of normal seasonal factors, which typically result in an increase in net working capital during the first half, an increased level of taxes paid following the higher profits earned in 2015 (2016: €5.8 million, 2015: €2.9 million), higher capital expenditure due to the timing of the maintenance shutdown in Packaging Papers and the phasing of investment projects in Coreboard and Cores (2016: €7.6 million, 2015: €2.1 million) and the increased level of distribution to shareholders (2016: €6.5 million, 2015: €4.3 million).

The Group remains in a strong financial position, with net debt of €42.9 million (31 December 2015: €37.1 million, 30 June 2015: €52.0 million) representing approximately 0.8 times annualised EBITDA (based on EBITDA from operating activities during the six months ended 30 June 2016).

On 28 July 2016, the Group entered into a new facilities agreement with its existing lender, Nordea Bank Finland, and HSBC Bank plc for the provision of €120 million of facilities with a five-year term. The new facilities provide the Group with financial security for the foreseeable future and are made available on considerably more favourable terms which will result in a significant reduction in total borrowing costs. Further details are provided in the Finance Review below.

Summary and Outlook

The Group performed well during the first half of the year despite encountering tougher market conditions in a number of areas. In particular, good progress has been made in the Coreboard and Cores activity. The integration of the Corenso businesses into the Group is now substantially complete and operational improvement is occurring in line with our expectations. The Packaging Papers business continued to perform well despite increased competitive pressure and we are confident that investments completed during the maintenance shutdown will deliver benefits during the second half.

Markets are expected to remain competitive throughout the second half of the year. Despite this, we expect to make further progress with operational improvement initiatives in both Coreboard and Cores and Packaging Papers and expect that the Group will continue to perform well for the remainder of the year.

Dermot Smurfit

Chairman

16 August 2016

BUSINESS REVIEW

Coreboard and Cores

Coreboard and Cores has made a good start to the year despite the impact of challenging economic conditions and considerable uncertainty in markets in China and Europe. Coreboard production and deliveries increased compared with the prior year as modest gains in the mills in Finland and the US were offset by a decrease in output from the French mill due to mechanical issues during the first quarter. The core converting operations performed well and total volumes were up by 4% on the prior year, with growth achieved across all regions as the benefits from restructuring and improvement initiatives launched during 2015 begin to take effect.

EBITDA from operating activities before non-recurring items increased by €3.0 million compared with the prior year. The results continue to be burdened by the cost of dual-running of legacy IT systems alongside the Group's new systems and infrastructure, but the impact of this was offset by the release of provisions made in 2015 against uncertainties. On an underlying basis, there was clear evidence of improvement in performance in the US and European businesses.

In North America, the coreboard mill continued to perform well as increased focus on operating efficiencies and productivity resulted in volumes which were up 2% on the prior year and a further improvement in contribution margins. The core converting operations also performed well, with improvement in both volumes and profitability despite the impact of an operational restructuring programme and disruption associated with the installation of a new winder in May.

Our businesses in China continued to experience challenging market conditions, but despite this, volumes increased by 8% compared with the prior year. Competitive pressures adversely impacted selling prices and both margins and profits reduced compared with the prior year, but were in line with our expectations. Notwithstanding the deterioration compared with the prior year, China continues to be one of our most profitable regions and we remain excited about the opportunities for further profitable expansion in this region.

In Europe, performance was mixed with the benefits from progress in the core converting operations partially offset by a higher than normal incidence of mechanical reliability issues in both coreboard mills. We were particularly pleased that despite headcount reductions, withdrawal from loss-making activities and a number of other operational changes made during 2015, the total production and delivery volumes from the core converting operations in Europe increased by 2% compared with the prior year demonstrating that there has been real underlying operational improvement. The profitability of these businesses also improved considerably as a result of the benefits from the restructuring of operations in Germany during the second half of 2015 and a determined focus on productivity, waste reduction and driving operational efficiencies throughout the region.

Packaging Papers

Following the record performance achieved in 2015, Packaging Papers experienced a reduction in profitability of €3.1 million on delivery volumes that were 5% down on the prior year and production volumes that were down by 10%. The volume reductions and the related reduction in profitability were principally due to the timing of the planned annual maintenance shutdown, which was scheduled for the first half of the year in 2016 compared with the second half in 2015. However, the mill also experienced an increased frequency of minor mechanical issues compared with the prior year and overall production efficiency was slightly below the record level achieved in 2015.

As highlighted in previous announcements, market conditions during the first half were more challenging than those of the prior year and the underlying pressure on volumes and pricing intensified as a result of weaker than expected fruit harvests in a number of markets following adverse weather conditions, the addition of some incremental capacity in semi-chemical fluting by a Nordic competitor and increases in kraftliner and recycled containerboard capacity in Europe. Despite this, the forward order book remained at reasonable levels throughout the period and the impact of more intense competition on average selling prices was relatively modest and largely offset by reductions in freight and distribution costs. Forward order books are slowly recovering at pricing levels which, although lower than those of the first half and the prior year, are in line with our expectations.

During the maintenance shutdown in May, a number of investments intended to reduce wood consumption, increase yield and capacity and improve paper performance were successfully completed. Although much work remains to be done to optimise production following these investments, the early signs are encouraging. Further investment projects are planned for the second half of the year and we expect that these will deliver improvements in quality and paper performance in a number of key areas.

Marco Casiraghi

Chief Executive Officer

16 August 2016

FINANCE REVIEW

Financial summary

Revenue reduced to €176.1 million (2015: €179.7 million), due largely to a reduction in sales from Packaging Papers, where the decision to take the planned annual maintenance stop during the first half of the year instead of the second impacted on production volumes and where average selling prices reduced slightly due to competitive pressures.

Segment EBITDA is stated before non-recurring items and before recognising unrealised gains and losses on derivative financial instruments used to hedge currency risk in the Packaging Papers activity and before the cost of share-based payment schemes, both of which are non-cash items.

EBITDA from operating activities before charging non-recurring expenses was unchanged at €26.5 million (2015: €26.5 million). There were no non-recurring items during the six-month period ended 30 June 2016 (2015: €2.5 million of expenses related to the acquisition and integration of the Coreboard and Cores activity).

The results for the period continue to be burdened by the cost of dual-running of legacy IT systems alongside the Group's new systems and infrastructure and were also impacted by the timing of the planned annual maintenance shutdown in Packaging Papers and the release of provisions made in 2015 against uncertainties in Coreboard and Cores.

There was a good level of improvement in the underlying performance of Coreboard and Cores, driven largely by the continuing strong performance of the US businesses and an improvement in profitability in the European core converting operations following restructuring in the German businesses and elsewhere during the second half of 2015. Together, these factors offset the decline in profitability experienced in the operations in China where market conditions were much tougher.

In addition to the impact of the timing of the planned annual maintenance shutdown on production volumes, deliveries and operating expenses, the pressure on order books in Packaging Papers over the last few months finally began to impact average selling prices during the second quarter, although the effect on margins was largely mitigated by lower selling and distribution costs.

Finance income and expenses

Net finance expenses were €3.1 million (2015: €2.9 million), consisting of finance income of €0.1 million (2015: €0.3 million) and interest and other borrowing expenses of €3.2 million (€3.2 million). Net finance expenses continue to be relatively high due to the structure of the Group's borrowing arrangements and the cost of the facilities put in place at the time of the Corenso acquisition in December 2014. The Group has recently completed a refinancing of its debt facilities which should result in a significant reduction in net interest costs in the future. Further details are provided below.

Taxation

The income tax charge of €5.0 million (2015: €5.2 million) represents an effective tax rate of 27% (2015: 28%) and has been determined using an estimate of the weighted average annual tax rate for the year applied to the underlying profit before taxation after adjusting for the impact of disallowable items of income and expenditure.

The underlying rate of tax on profits in Finland during the year was 20% (2015: 20%). The difference between this and the estimated rate arises principally because a significant proportion of the Group's profits are generated in territories where higher rates of tax apply.

Profit after taxation and Earnings Per Share

The profit for the period was €13.5 million (2015: €13.0 million). Basic earnings per share was 4.5 cents per share (2015: 4.3 cents per share) and diluted earnings per share was 4.3 cents per share (2015: 4.1 cents per shares).

Return of capital

A return of invested non-restricted equity of 3.00 cents per share was made in lieu of a dividend for the year ended 31 December 2015 (2015: dividend of 1.50 cents per share for the year ended 31 December 2014). The record date for the distribution was 3 June 2016 and the payment was made on 21 June 2016 at a total cost of €8.7 million (2015: €4.3 million).

Dispute with the Finnish Tax Administration

The Group is involved in a dispute with the Finnish tax administration over the taxation of gains arising on the disposal in May 2011 of its interests in the Scheufelen group of companies. The Group believes that the gains arising on the disposal should be exempt from tax under the substantial shareholder exemptions that apply within Finland and the EU. However, the tax assessments issued by the Finnish tax administration for the year ended 31 December 2011 included €3.6 million of taxes, which the Group is contesting.

In order to avoid the risk of interest and penalties, the Group has paid the amounts concerned but has not yet recognised the expense in its income statement and instead the amount of the taxes paid is recorded as a current financial asset in the balance sheet. In the event that the Group does not prevail in its appeal against the tax assessments, additional taxes of €3.6 million would have to be recognised within the results of discontinued operations. There would be no impact on the net cash position of the Group.

The matter is the subject of an appeal to the Finnish Supreme Administrative Court and there have been no material developments during the current period. Further details of the nature and status of the dispute are provided in the Annual Report for the year ended 31 December 2015.

Financial Position

The total assets and total equity and liabilities of the Group reduced by €10.1 million to €275.8 million (31 December 2015: €286.0 million, 30 June 2015: €279.9 million), while total equity increased by €3.2 million to €105.1 million (31 December 2015: €101.9 million, 30 June 2015: €90.7 million).

The reduction in total assets and total equity and liabilities of €10.1 million was due to the impact of seasonal factors on net working capital and net debt. The increase in total equity of €3.2 million was attributable to the increase in retained earnings as a result of the profit for the period of €13.5 million and the decrease in the reserve for invested non-restricted equity of €8.7 million following the distribution to shareholders, with the majority of the difference relating to the impact of the movement in exchange rates on the carrying value of assets and liabilities of foreign operations.

Capital expenditure increased to €7.6 million (2015: €2.1 million) and was higher than depreciation and amortisation of €4.9 million (2015: €5.0 million). The increase in expenditure reflects the timing of the planned annual maintenance stop in Packaging Papers, completion of a number of projects in Coreboard and Cores that were initiated during 2015 and continuing investment in the Group's new IT systems and infrastructure. Excluding expenditure on the replacement of IT systems, capital expenditure for the full year should be broadly comparable with depreciation.

Cash flow, borrowings and liquidity risk

The Group experienced a net cash outflow during the period of €5.8 million (2015: €9.2 million inflow) due to a combination of a seasonal increase in net working capital, higher taxes, higher capital expenditure and the increased level of distribution to shareholders.

The principal sources and uses of cash during the period were as follows:

· €12.7 million net cash inflow from operating activities (2015: €15.2 million inflow)

· €7.6 million capital expenditure (2015: €2.1 million)

· €6.5 million return of capital to shareholders (2015: €4.3 million dividend)

· €2.6 million net cash interest expense (2015: €2.6 million)

The net cash inflow from operating activities reduced by €2.5 million compared with the same period of the prior year and consisted of profits from trading activities after adjusting for non-cash items of €26.3 million (2015: €25.9 million), an increase in net working capital of €7.8 million (2015: €7.7 million) and payment of income taxes of €5.8 million (2015: €2.9 million). The main reason for the lower level of net cash inflow from operating activities was the increase in taxes payable on the higher level of profits earned in 2015 compared with 2014.

Borrowings and liquidity risk

At 30 June 2016, the Group had balance sheet net debt of €42.9 million (31 December 2015: €37.1 million, 30 June 2015: €52.0 million), consisting of cash and cash equivalents of €47.5 million (31 December 2015: €59.2 million, 30 June 2015: €56.7 million) and interest bearing loans and borrowings, stated net of capitalised finance expenses, of €90.4 million (31 December 2015: €96.3 million, 30 June 2015: €108.7 million).

Although net debt increased during the period by €5.8 million, the Group made good progress with its efforts to improve its management of liquidity and the efficiency of its financing structure. Gross borrowings reduced considerably and are now €18.3 million lower than the same point in the prior year.

On 28 July 2016, the Group entered into a new facilities agreement with its existing lender, Nordea Bank Finland, and HSBC Bank plc for the provision of €120 million of facilities with a five-year term. The new facilities consist of a term loan of €80 million and a revolving credit facility of €40 million, both of which remain available to the Group throughout the period to 28 July 2021 without amortisation. The covenants and other conditions which apply to the new facilities are substantially the same as those which applied to the Group's previous borrowing arrangements but the lending margins are considerably more favourable and will result in a significant reduction in total borrowing costs.

Foreign currency risk

The functional and reporting currency of the Group is the Euro. The Group sells and distributes its products in international markets and has transactional exposure to a number of other currencies and in particular, to the US Dollar. Following the acquisition of Corenso, the Group also operates businesses in countries which use currencies other than the Euro. In particular, it has operations in countries using the Swedish Krone, US Dollar, British Pound and the Chinese Renminbi.

In the six-month period ended 30 June 2016, approximately 29% of the Group's sales by volume and value and 15% of its expenditure on raw materials, consumables and other expenses were denominated in US Dollars. The relative movement in the US Dollar against the Euro during 2016 when compared to 2015 was as follows:

· Movement in average exchange rate between six months ended 30 June 2015 and 30 June 2016 - no material change

· Movement in exchange rate at balance sheet date between 31 December 2015 and 30 June 2016 - 2.0% favourable

It is the policy of the Group to hedge a portion of its foreign currency exposures for a period of up to 12 months using forward exchange contracts. Therefore, it may take some time for the effect of movements in foreign exchange rates to be reflected in the performance of the Group.

Where possible the Group takes advantage of natural hedges and only considers hedging the net exposure. Decisions on the implementation of the hedging policy are made by the senior management of the Group and are discussed with and reported to the Board on a regular basis. Amendment of the hedging policy itself is a matter reserved for the Board. The Group does not designate currency derivative contracts as hedges for the purpose of hedge accounting and does not engage in currency speculation.

Risks and uncertainties

The principal risks and uncertainties facing the business and the activities of the Group and the steps that are taken to mitigate these have not changed from those presented in the 2015 Annual Report, which is available for download from the Group's website.

Going concern

Relative to its size, the Group has considerable financial resources and long term contracts and relationships with its key customers and suppliers. As a consequence, the Directors consider that the Group is well placed to manage its business risks successfully.

After making diligent enquiries, the Directors have a reasonable expectation that that Group has adequate resources to enable it to continue its activities for the foreseeable future, being a period of at least 12 months from the date of approval of the financial statements, and accordingly, continues to adopt the going concern basis in preparing the financial statements.

David Walton

Chief Financial Officer

16 August 2016

RESPONSIBILITY STATEMENT

The directors are responsible for preparing the interim condensed consolidated financial statements in accordance with applicable law and regulations.

In preparing the financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.

International Accounting Standard 1 requires that directors:

· properly select and apply accounting policies;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements of an IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and performance; and

· make an assessment of the Group's ability to continue as a going concern.

The directors confirm that to the best of their knowledge:

· the interim condensed consolidated financial statements of the Group for the six months ended 30 June 2016, have been prepared in accordance with IAS 34 Interim Financial Reporting;

· the interim management report includes a fair review of the development and performance of the business and of the position of the undertakings included in the consolidation, taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· the interim condensed consolidated financial statements and interim management report, taken as a whole, are presented in a fair, balanced and understandable manner.

Approved by the Board and signed on its behalf by:

Dermot F Smurfit Marco Casiraghi David Walton

Chairman Chief Executive Chief Financial Officer

16 August 2016

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION

To the Board of Directors of Powerflute Oyj

Introduction

We have reviewed the accompanying condensed consolidated interim financial information of Powerflute Oyj ('Powerflute' or 'the Company') for the six months ended 30 June 2016, consisting of the Income Statement, Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity and Cash Flow Statement, together with related Notes 1 to 21.

The Board of Directors and the Managing Director are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 - Interim Financial Reporting. Our responsibility is to express a conclusion on the interim financial information based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements ISRE 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity.' A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial information for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34.

Helsinki, 16 August 2016

ERNST & YOUNG OY
Accountant Firm

Erkka Talvinko

Authorised Public Accountant

Notes: A review does not provide assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular on whether any changes may have occurred to the financial information since first published. These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area.

INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS

for the six months ended 30 June 2016

The notes on pages 19 to 35 form an integral part of this condensed consolidated interim financial information

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2016

The notes on pages 19 to 35 form an integral part of this condensed consolidated interim financial information

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2016

The notes on pages 19 to 35 form an integral part of this condensed consolidated interim financial information

INTERIM CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 June 2016

The notes on pages 19 to 35 form an integral part of this condensed consolidated interim financial information

NOTESTO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1 Corporate Information

Powerflute Oyj (the 'Company') is a public limited company incorporated and domiciled in Finland.The Company's shares are listed on the Alternative Investment Market ('AIM') of the London Stock Exchange.

The principal activities of the Company and its subsidiaries (collectively, the 'Group') are the manufacture of paper and packaging products and are described in more detail in Note 7.

The address of the Company's registered office is Sorsasalo/Box 57, FI-70101 Kuopio, Finland.

The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2016 were approved for issue by the Company's Board of Directors on 16 August 2016.

These interim condensed consolidated financial statements have been reviewed, not audited.

2 Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 June 2016 have been prepared in accordance with IAS 34 Interim Financial Reporting.The interim condensed consolidated financial statements do not include all the information and disclosures required in annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2015.

3 Significant accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2015, except for the adoption of new standards and interpretations as of 1 January 2016. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The nature and impact of each new standard or amendment is described below. Although these new standards and amendments apply for the first time in 2016, they do not have a material impact on the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.

IFRS 14 Regulatory Deferral Accounts

IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of IFRS. Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and OCI. The standard requires disclosure of the nature of, and risks associated with, the entity's rate-regulation and the effects of that rate-regulation on its financial statements. IFRS 14 is effective for annual periods beginning on or after 1 January 2016. Since the Group is an existing IFRS preparer and is not involved in any rate-regulated activities, this standard does not apply.

Amendments to IFRS 11: Joint Arrangements: Accounting for Acquisitions of Interests

The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business, must apply the relevant IFRS 3 Business Combinationsprinciples for business combination accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation if joint control is retained. In addition, a scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation and are prospectively effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments do not have any impact on the Group as there has been no interest acquired in a joint operation during the period.

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

The amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is a part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments do not have any impact to the Group given that the Group has not used a revenue-based method to depreciate its non- current assets.

Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41 Agriculture. Instead, IAS 16 will apply. After initial recognition, bearer plants will be measured under IAS 16 at accumulated cost (before maturity) and using either the cost model or revaluation model (after maturity). The amendments also require that produce that grows on bearer plants will remain in the scope of IAS 41 measured at fair value less costs to sell. For government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance will apply. The amendments are retrospectively effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments do not have any impact to the Group as the Group does not have any bearer plants.Amendments to IAS 27: Equity Method in Separate Financial Statements

The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. Entities already applying IFRS and electing to change to the equity method in their separate financial statements will have to apply that change retrospectively. First time adopters of IFRS electing to use the equity method in their separate financial statements will be required to apply this method from the date of transition to IFRS. The amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments do not have any impact on the Group's consolidated financial statements.

Annual Improvements 2012-2014 Cycle

These improvements are effective for annual periods beginning on or after 1 January 2016. They include:

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Assets (or disposal groups) are generally disposed of either through sale or distribution to owners. The amendment clarifies that changing from one of these disposal methods to the other would not be considered a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in IFRS 5. This amendment must be applied prospectively.

IFRS 7 Financial Instruments: Disclosures

(i) Servicing contracts

The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures would not need to be provided for any period beginning before the annual period in which the entity first applies the amendments.

(ii) Applicability of the amendments to IFRS 7 to condensed interim financial statements

The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report. This amendment must be applied retrospectively.

IAS 19 Employee Benefits

The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. This amendment must be applied prospectively.

IAS 34 Interim Financial Reporting

The amendment clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report (e.g., in the management commentary or risk report). The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. This amendment must be applied retrospectively.

These amendments do not have any impact on the Group.

Amendments to IAS 1 Disclosure Initiative

The amendments to IAS 1 clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify:

· The materiality requirements in IAS 1

· That specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated

· That entities have flexibility as to the order in which they present the notes to financial statements

· That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI. These amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments do not have any impact on the Group.

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

The amendments address issues that have arisen in applying the investment entities exception under IFRS 10 Consolidated Financial Statements. The amendments to IFRS 10 clarify that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value.

Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28 Investments in Associates and Joint Ventures allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries.

These amendments must be applied retrospectively and are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments do not have any impact on the Group as the Group does not apply the consolidation exception.

4 Significant accounting judgements, estimates and assumptions

The preparation of the interim condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

In preparing these interim condensed consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were substantially the same as those that applied to the consolidated financial statements for the year ended 31 December 2015.

Key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, where a different opinion could result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Taxation of gains arising on disposal of shares

During the year ended 31 December 2011, the Group sold a portion of its shareholding in Harvestia and sold its entire interest in the Graphic Papers businesses, realising a profit on both disposals. In preparing its interim condensed consolidated financial statements and annual financial statements for periods since this date, the Group has assumed that the resulting gains are exempt from corporate taxes under the substantial shareholder exemptions available to industrial companies in Finland.

During the year ended 31 December 2012, the Group was informed by the Finnish Tax Administration that it is considered to be a venture capital company and is not eligible to take advantage of the substantial shareholder exemptions. The Tax Administration considered that the gains arising on the share disposals should be subject to tax and issued tax assessments for the year ended 31 December 2011 including €3,571,000 of taxes relating to the share transactions.

Following a detailed review of the facts and circumstances, the Group considered that it had strong and defensible arguments against the decision of the Tax Administration and during the year ended 31 December 2013 filed an appeal with the Assessment Adjustment Board (AAB). In December 2013, the Group's appeal against the original tax assessments was upheld by the AAB.

In March 2014, the Group received notification that the Tax Administration had filed an appeal against the decision of the AAB with the Administrative Court in Helsinki. In March 2015, the Administrative Court ruled in favour of the Tax Administration and upheld the original tax assessments. Following review of the decision in conjunction with its advisers, the Group continues to believe that it has strong and defensible arguments to support its position and has requested permission to further appeal the decision to the Supreme Court.In view of this, the financial statements for the six months ended 30 June 2016 continue to be prepared on the basis that the Group is an industrial company and that the gains arising on the disposals will be exempt from corporate taxes.

While the taxes have been paid to avoid the risk of interest and other penalties, the taxes assessed by the Tax Administration and paid by the Group have not been recognised in the income statement, but have been recorded as a current financial asset in the balance sheet. In the event that the Group does not prevail in its appeal against the tax assessment, then additional taxes of €3,571,000 would have to be recognised within the results of discontinued operations. There would be no impact on the net cash position of the Group, or on the results from continuing operations.

5 Principal risks and uncertainties

The principal risks and uncertainties faced by the continuing operations of the Group have not changed from those described in the 2015 Annual Report. Changes in the macroeconomic environment, competition, technology, people, and financial conditions all have the potential to adversely impact on the Group's operating and financial performance. A more detailed explanation of these risks and uncertainties is set out on pages 12 and 13 of the Annual Report for the year ended 31 December 2015, a copy of which is available on the Group's website.

6 Seasonality of operations

The Group's business activities are seasonal in nature and higher revenues, operating profits and cash generation are generally expected in the second half of the year, although this can be affected significantly by the timing of annual maintenance shutdowns which reduce production availability, or changes in market conditions which can impact demand and average pricing levels.

7 Segmental information

For management purposes, the Group is organized into business units based upon the products and services which it supplies. The Group currently has two reportable operating segments:

· Coreboard and Cores, which is involved in the manufacture of high performance coreboard and cores, with coreboard mills in the Europe and the United States and a network of core producing facilities in Europe, the United States and China.

· Packaging Papers,which is involved in the production and sale of Nordic semi-chemical fluting for use in premium-grade corrugated-box applications and operates a fluting mill in Kuopio, Finland.

No operating segments have been aggregated to form the above reportable operating segments.

The joint ventures and associated companies in which the Group has an interest form an integral part of its principal operating activities and the Group's share of the profits or losses of such joint ventures and associated companies are reported within the relevant operating segment.

Management monitors the operating results of business units separately for the purpose of making decisions about resource allocation and performance assessment. The principal measure used to monitor and evaluate segmental performance is earnings before interest, tax, depreciation and amortisation ('EBITDA'). The measurement basis for Segment EBITDA excludes the effects of equity-settled share-based payments and unrealised gains or losses on financial instruments. The costs of central functions, including the costs of corporate and other central services, are allocated to the reportable operating segments using appropriate cost allocation methodologies. Interest income and expenditure are not allocated to operating segments.

Transfer prices between operating segments are on an arm's-length basis in a manner similar to transactions with third parties.

Adjustments, eliminations and unallocated items

Inter-segment revenues are eliminated on consolidation and are shown as adjustments or eliminations. Finance income, finance expenses, acquisition-related expenses, fair value gains and losses on certain types of financial assets and liabilities and taxes are not allocated to individual segments but are managed on an overall basis and are reported within adjustments and eliminations in the segmental analysis.

Seasonality of operations

The Packaging Papers segment is a supplier of paper and packaging materials intended for use predominantly in fruit and vegetable packaging. Due to the seasonal nature of this segment higher revenues and profits are usually expected in the second half of the year rather than in the first six months, although this can be affected by the timing of maintenance related shutdowns. The Group has concluded that this segment should not be considered 'highly seasonal' using the meaning set out in IAS 34 and presentation of additional comparative information is not required. This information is provided solely for the purposes of permitting a better understanding of the results.

8 Impairment testing of goodwill and intangible assets

The Group reviews the valuation of its assets and tests for impairment on an annual basis in December of each year and where appropriate considers the requirement for impairment. Impairment testing of goodwill and intangible assets with indefinite lives is based on value-in-use calculations. The methodologies and key assumptions used to determine the recoverable amount for different cash generating units were disclosed where relevant in the annual consolidated financial statements for the year ended 31 December 2015.

The Group considers the relationship between its market capitalisation and the book value of its assets and liabilities, among other factors, when reviewing for indicators of impairment. As at 30 June 2016, the market capitalisation of the Group was significantly higher than the book value of its equity and no triggering events regarding the impairment of Group's assets were identified. Therefore, the Group has not performed any impairment testing on its assets or business units as at 30 June 2016.

9 Income tax

Income tax is recognized based upon management's best estimate of the weighted average annual income tax rate expected for the full financial year.

Major components of income tax in the interim consolidated income statement are:

10 Components of other comprehensive income

Deferred tax items recognised in other comprehensive income during the period:

11 Dividends and repatriation of capital

A repatriation of capital from the reserve for invested non-restricted equity of 3.00 cents per share was proposed by the directors in lieu of a dividend for the year ended 31 December 2015 and was approved by shareholders at the Annual General Meeting held on 26 May 2016. The record date for the capital redemption was 3 June 2016 and payment was made on 21 June 2016.

12 Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated in accordance with the requirements of IAS 33 - Earnings per share, by dividing the net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

Authority to repurchase shares

On 26 May 2016, the Annual General Meeting granted authority to the Board of Directors to decide on the repurchase of up to 29,000,000 of the company's shares pursuant to Chapter 15, Section 5(2) of the Finnish Companies Act by using funds in the company's unrestricted equity. The proposed amount of shares corresponded to approximately 10.0 % of all shares and votes of the company then in issue. The authority remains effective until 30 June 2017 unless revoked or amended before this date by a General Meeting of Shareholders, and replaces any previous similar authorities granted to the Board of Directors.

Authority to issue new shares

On 26 May 2016, the Annual General Meeting granted authority to the Board of Directors to resolve on the issuance of up to 29,000,000 shares through a share issue or granting of options or other special rights granting entitlement to shares pursuant to Chapter 10, Section 1 of the Finnish Companies Act. This authority may be utilised in one or several issues. The Board of Directors may resolve to give either new shares or shares in the company's possession. The proposed amount of shares corresponded to approximately 10.0 % of all shares and votes of the Company then in issue. This authority provides the right to deviate from the shareholders' pre-emptive subscription right. The authority remains effective until 30 June 2017 unless revoked or amended before this date by a General Meeting of Shareholders, and replaces any previous similar authorities granted to the Board of Directors.

13 Property, plant and equipment

The Group acquired assets with a cost of €7,602,000during the six months ended 30 June 2016 (2015: €2,065,000).

No assets (other than those classed as held for sale) were disposed of during the six months ended 30 June 2016 (2015: €1,662,000l), which did not result in any net gain on disposal (2015: €2,064,000).

14 Financial assets and liabilities

Set out below is a summary of the financial assets and financial liabilities of the Group as at 30 June 2016, 31 December 2015 and 30 June 2015.

Available for sale investment

In February 2015, the Group entered into a conditional sale agreement for the disposal of its 10% interest in Kotkamills for cash consideration of €3,724,000. Accordingly, the fair value of this investment was reassessed and the Group recorded a gain of €2,064,000 in the statement of comprehensive income with respect to Level 3 financial instruments as at 31 December 2014. The transaction completed on 24 March 2015 and the realised gain was recorded in the interim consolidated statement of profit or loss for six months ended 30 June 2015.

Derivative financial instruments

Amounts recorded within financial assets and liabilities relating to derivative financial instruments were as follows:

Derivative financial instruments are recorded on the balance sheet at fair value.

The Group uses foreign exchange forward contracts to manage some of its transaction exposures. Currency forward contracts are not designated as cash flow, fair value or net investment hedges and are entered into for periods consistent with currency transaction exposures up to 12 months in advance.

Hedge accounting has been applied to commodity derivatives. Gains and losses arising on commodity derivatives are recognized in the hedging reserve in equity and are recognized in the income statement during the period or periods in which the hedged forecast transaction affects the income statement. This is generally within 12 to 24 months of the balance sheet date.

Contingent consideration

Under the terms of the purchase agreement for the acquisition of the Corenso businesses completed in December 2014, the Group agreed to make additional payments to the previous owner contingent upon the occurrence of certain future events. In particular:

· In the event that the Group was able to recover deferred consideration of €1,000,000 relating to an earlier sale of shares in Mandriladora Alpesa SL, then such consideration must be paid over in full to the previous owner.

· In the event that the Group was able to utlise accumulated tax losses of the North American operations to offset future taxable profits, then an amount equivalent to the net cash tax saving must be paid over to the previous owner up to a maximum amount of $2,700,000.

The Group did not attach any value to the assets which are the subject of the contingent consideration arrangements and any liability to make payments to the former owner of Corenso will be financed directly from realisation of the assets concerned.

During the six-month period ended 30 June 2016, the Group recovered the full amount of the €1,000,000 receivable due from Mandriladora Alpes SL and this amount was transferred to Stora Enso.

During 2015, the assumed utilisation of tax losses by the North American operations reduced the cash taxes payable by an estimated €1,883,000 (2014: nil). As the Group derived no benefit from the utilisation of the losses, the effective tax charge for the period was not reduced. However, the portion of the tax charge relating to utilisation of the losses instead of being shown as a current income tax liability was recorded within other current liabilities. During the six-month period ended 30 June 2016, following finalization of the tax computations for the year ended 31 December 2015, an amount of €1,774,000 was paid to Stora Enso in connection with the utilisation of tax losses during the year ended 31 December 2015.

Fair values

Fair value hierarchy

All financial instruments for which fair value is recognised or disclosed are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole as follows:

· Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities

· Level 2 - Valuation techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly

· Level 3 - Valuation techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data

For assets and liabilities that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. There were no transfers between Level 1 and Level 2 fair value measurements and no transfers into or out of Level 3 fair value measurements during the six month period ended 30 June 2016.

15 Cash and short-term deposits

For the purpose of the interim condensed statement of cash flows, cash and cash equivalents are comprised of the following:

16 Reversal of provisions

As at 31 December 2015, the Group had recognised provisions of €907,000 against the potential non-recovery of amounts receivable from Verso Corporation and €1,057,000 against the potential non-recovery of value added taxation on expenses incurred in connection with the acquisition of Corenso in December 2014. Verso Corporation filed for Chapter 11 bankruptcy protection in January 2016, but under the terms of a settlement agreement made in March 2016 the Group's net loss was limited to €219,000. The value added taxes attributable to acquisition expenses were successfully recovered by Group in full in April 2016. In both cases, the unused amounts of the provisions have been reversed during the six-month period ended 30 June 2016 and the reversals have been included within the line items in the statement of profit and loss where the creation of the provisions were originally recorded.

17 Share-based payments

For the six months ended 30 June 2016, the Group has recognised a share-based payment expense of €152,000 in the income statement (30 June 2015: €218,408).

Grant of share options during the six-month period ended 30 June 2016

InApril 2016, options over 1,400,000 shares were granted to senior executives under the terms of the Powerflute Stock Option Scheme 2012 ('PSOS 2012'). The grant consisted of two separate categories of options, designated as 2012E and 2012F, with 700,000 of each option granted. The 2012E and 2012F options are subject to different performance targets and measurement periods, but in all other respects are identical.

Successful vesting of the options is dependent upon the achievement of demanding performance targets, with 50% of each award linked to the average annual increase in basic earnings per share ('EPS') and 50% linked to the average annual total shareholder return ('TSR') over the relevant measurement periods. The subscription price, key performance targets and measurement periods of the 2012E and 2012F share options are as follows:

Where the average annual increase in EPS or the average annual TSR is below 10.0%, none of the relevant portion of the award will vest, with proportional vesting applying between the minimum and maximum thresholds. Shares acquired as a result of exercise of the 2012E and 2012F options are subject to a minimum holding period and may not be sold during the two-year period commencing on the measurement date. There is no cash settlement of the options.

The fair value of the shares granted was estimated at the date of the grant using a two-stage valuation model to estimating the amount and value of the share options. In addition to the technical features of the options, the fair value of the options was estimated on the date of grant using the following assumptions:

Expected share price volatility (%): 30.4

Expected EPS volatility (%): 15.2

Risk-free interest rate (%): 0.5

Expected life (years): 6

Annual required rate of return (5%) 5.0

The total number of options now granted under the PSOS 2012 and other share option schemes is 7,237,100, equivalent to 2.5% of the existing issued share capital of the company (excluding shares held in treasury).

18 Borrowings and loans

Movements in borrowings are analysed as follows:

19 Commitments and contingencies

Mortgages

The Group has pledged the assets and shares of its principal trading subsidiary companies as security for interest-bearing borrowing facilities provided by Nordea and Finnvera.

Capital commitments

At 30 June 2016, the Group had capital commitments of €6,860,000 (31 December 2015: €7,547,000) relating to investment in plant and equipment, ERP implementation and IT infrastructures.

20 Related Party Transactions

Certain of the Group's directors and members of its executive management team have significant beneficial and non-beneficial interests in the ordinary share capital of the Group. Full details of these interests are disclosed in the annual financial statements for the year ended 31 December 2015.

a) Transactions with related parties

Savon Sellu Oy, a subsidiary of Group, purchases a proportion of its raw materials from Harvestia Oy. The goods are purchased on normal market terms.

Transactions with related parties for the six months ended 30 June 2016 and 30 June 2015 were as follows:

Amounts due to and from related parties as at 30 June 2016, 31 December 2015 and 30 June 2015 were as follows:

b) Key management compensation

Key management compensation for the six months ended 30 June 2016 amounted to €928,000 (2015: €879,000) analysed as follows:

c) Directors' interest in employee share incentive plans

The share options held by executive members of the Board of Directors providing entitlement to purchase ordinary shares have the following expiry dates and exercise prices:

On 4 April 2016, Marco Casiraghi and David Walton, both directors of the Company, exercised their rights under share options granted to them by the Company to subscribe for the following shares with immediate effect:

· Marco Casiraghi - 4,673,600 shares, of which 2,000,000 shares had no subscription price and 2,673,600 shares had a subscription price of €0.01 per share.

· David Walton - 1,858,600 shares, with a subscription price of €0.01 per share.

On 4 April 2016, the Group made further awards of share options to Marco Casiraghi and David Walton under the terms of the Powerflute Share Option Scheme 2012 details of which are provided in Note 17.

Further details of the share options awarded to directors of the Company are provided in Note 17 and in the Annual Report for the year ended 31 December 2015.

21 Events after the reporting period

On 28 July 2016, the Group entered into a new facilities agreement with its existing lender, Nordea Bank Finland, and HSBC Bank plc for the provision of €120 million of facilities with a five-year term. The new facilities consist of a term loan of €80 million and a revolving credit facility of €40 million, both of which remain available to the Group throughout the period to 28 July 2021 without amortisation. The covenants and other conditions which apply to the new facilities are substantially the same as those which applied to the Group's previous borrowing arrangements but the lending margins are considerably more favourable and will result in a significant reduction in total borrowing costs.