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STOCK EXCHANGE RELEASE 1 Feb 2008

PÖYRY PLC'S NOTICE CONCERNING ANNUAL ACCOUNTS FOR 2007

Earnings per share for the financial year were EUR 0.88. The return on investment exceeded the strategic target, amounting to 41.7 per cent. The consolidated balance sheet is healthy; the net debt/equity ratio (gearing) was -47.4 per cent. The order stock increased, amounting to EUR 562.8 million at the end of the year. The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.65 per share be paid.
 
Consolidated earnings and balance sheet
 
As a result of good demand, the Pöyry Group's strong market position and the streamlining of its operations, consolidated net sales increased to EUR 718.2 (623.3 in the previous year) million and profit before taxes improved significantly during the year under review. Profit before taxes was EUR 76.5 (50.2 in the previous year) million. The net profit for the period was EUR 52.8 (34.8) million. Earnings per share improved by 51.7 per cent during the year to EUR 0.88 (0.58).
 
The target for the Group's return on investment is 20 per cent or more on average; in 2007 the return on investment was 41.7 (31.1) per cent.
 
The consolidated balance sheet is healthy. The equity ratio is 50.7 (49.2) per cent. The Group's liquidity is good. The net debt/equity ratio (gearing) was -47.4 (-37.6) per cent.
 
The Group's order stock increased during the financial year. At the end of the year it amounted to EUR 562.8 (507.6) million.
 
Prospects
 
The Pöyry Group has a strong market position in all of its business areas. The order stock is good, having increased by EUR 55 million during 2007. Consolidated net sales will grow during 2008. Consolidated profit before taxes is expected to improve in 2008. The repercussions in other national economies of the uncertainty in the US economy may have a negative impact on investment demand during 2008.
 
The Auditors' Report is dated 31 January 2008.
 
Dividend
 
The parent company of Pöyry Group, Pöyry Plc's net profit for 2007 was EUR 32 050 336.92 and retained earnings was EUR 19 008 344.17 thus the total amount of distributable earnings was EUR 51 058 681.09. The Board of Directors of Pöyry Plc proposes to the Annual General Meeting on 10 March 2008 that a dividend of EUR 0.65 (0.50) per share be paid for the year 2007. The number of shares is 58 652 614 and the total amount of dividends thus EUR 38 124 199.10. The Board of Directors proposes that the dividend be paid on 20 March 2008.
 
Annual General Meeting
 
Pöyry Plc's Annual General Meeting will be held on March 10, 2008 at the Pöyry House, Vantaa, Finland. The invitation to the Annual General Meeting will be published in its entirety as a separate notice on 1 February 2008 at 9.00 a.m.
 
Enclosures
Board of Directors' Report, 1 January - 31 December 2007
Consolidated statement of income, balance sheet, statement of changes in financial position, changes in equity and liabilities, related party transactions, key figures and acquisitions
 
PÖYRY PLC
 
Erkki Pehu-Lehtonen
President and CEO
 
Teuvo Salminen
Deputy to the President and CEO
 
Additional information by:
Erkki Pehu-Lehtonen, President and CEO, Pöyry Plc
Tel. +358 10 33 22999, +358 400 468 084
Teuvo Salminen, Deputy to the President and CEO, Pöyry Plc
Tel. +358 10 33 22872, +358 400 420 285
 
 
DISTRIBUTION:
OMX Nordic Exchange Helsinki
Major Media
 
 
PÖYRY GROUP
 
BOARD OF DIRECTORS' REPORT, 1 JANUARY - 31 DECEMBER 2007
 
Consolidated earnings and balance sheet
 
As a result of good demand, the Pöyry Group's strong market position and the streamlining of its operations, consolidated net sales increased to EUR 718.2 million and profit before taxes improved significantly during the year under review. Profit before taxes was EUR 76.5 (50.2 in the previous year) million, which equals 10.7 per cent of net sales. The strike in the consulting engineering sector in Finland in November reduced consolidated earnings by an estimated EUR 2-3 million. The net profit for the period was EUR 52.8 (34.8) million. Earnings per share improved by 51.7 per cent during the year to EUR 0.88 (0.58). The Group's financial target is to achieve an improvement in earnings per share averaging 15 per cent a year.
 
The target for the Group's return on investment is 20 per cent or more on average. In 2007 the return on investment was 41.7 (31.1) per cent.
 
The consolidated balance sheet is healthy. The equity ratio is 50.7 (49.2) per cent. The Group's liquidity is good. At the end of the year, the Group's cash and cash equivalents amounted to EUR 98.7 (74.9) million. Interest-bearing debts totalled EUR 8.9 (13.6) million. The net debt/equity ratio (gearing) was -47.4 (-37.6) per cent.
 
At the beginning of 2007, the Pöyry Group expected profit before taxes for the year under review to improve compared with 2006. In the interim report for the first quarter the earnings estimate was raised and earnings were forecast to improve clearly. In the interim report for the third quarter, the earnings estimate was raised and earnings were forecast to improve significantly. The improvement in earnings in 2007 was primarily due to better demand, successful integration and favourable earnings development of mergers and acquisitions, and improved internal efficiency mostly in the use of Group resources and in project implementation.
 

Key figures, EUR million
2007
2006
2005
 
 
 
 
Net sales
718.2
623.3
523.6
Profit before taxes
76.5
50.2
38.6
Profit for the year, of which attributable to equity holders of the parent company
52.8
51.3
34.8
33.6
26.3
25.9
Earnings/share, EUR
0.88
0.58
0.45
Return on investment, %
41.7
31.1
25.8
Equity ratio
50.7
49.2
49.8
Cash and cash equivalents
98.7
74.9
64.5
Interest-bearing debts
8.9
13.6
10.7
Gearing, %
-47.4
-37.6
-36.1
 
Business groups
 
The parent company of the Pöyry Group is Pöyry Plc. The parent company is responsible, among other things, for developing the Group's strategy and for supervising its implementation, for financing, for exploiting synergistic benefits and for general co-ordination of the Group's operations. The parent company has charged service fees for general administration and parent company costs to the business groups. The relative share charged is derived from the business groups' payroll costs.
 
The Pöyry Group's business operations are conducted through three business groups: Energy, Forest Industry, and Infrastructure & Environment. The business groups are globally responsible for their operations. All three business groups offer a full range of consulting, investment planning and implementation, maintenance planning and operations improvement services to their clients, covering the entire lifecycle of their business.
 
Energy
 
Supported by the continued economic growth in 2007, the brisk activity in the world's energy markets continued. The desire to mitigate the impacts of climate change and to diversify the production based on crude oil promoted interest in renewable sources of energy.
 
To be able to meet the strongly increased demand for its services and to optimise the use of its resources, the business group focused on utilising its international network effectively across business unit and national borders. This business concept proved successful in several projects and there was major progress in its application.
 
The Energy business group's net sales in 2007 were EUR 217.5 (197.4) million. Operating profit was EUR 21.0 (14.6) million. Demand for energy-related services remained good and the business group further strengthened its global market position. The successful integration of the management consulting and oil and gas businesses acquired in 2006 and 2007 had a favourable impact on earnings during the year under review.
 
The order stock remained good, amounting to EUR 212.7 (204.9) million at the end of the year. The most important new projects were the bioethanol plant for San Carlos Bioenergy Inc. in the Philippines (EUR 10 million), the Puttalam coal-fired power plant project in Sri Lanka (EUR 7 million), the combined heat and power plant project with Propower GmbH in Germany (EUR 6.2 million), Fortum Power and Heat Oy's combined heat and power plant project in Finland (EUR 5 million), the Rudbar-e-Lorestan hydropower project in Iran (EUR 7 million), the diesel oil storage EPC contract with Esergui s.a. in Spain (EUR 9.5 million), the Vung Ang coal-fired power plant in Vietnam (EUR 11 million) and the Winterthur waste to energy plant rehabilitation project in Switzerland (EUR 5.5 million).
 

Energy, EUR million
2007
2006
2005
 
 
 
 
Net sales
217.5
197,4
160,0
Operating profit
21.0
14,6
9,1
Operating profit, %
9.7
7,4
5,7
Order stock
212.7
204,9
195,2
Personnel at year-end
1838
1692
1463
 
Forest Industry
 
The focus of new investment projects was in the emerging markets of South America and Asia. In North America the business group carried out a few paper mill rebuilds, and in Europe a number of new paper mill engineering projects were completed. In Russia, preparations for new investments gained momentum. Project activity in the chemical sector continued briskly, as did the development and implementation of biofuel projects. The business group continued to expand and diversify its range of integrated engineering, procurement and construction management (EPCM) services. Local services were extended to cover also other sectors of industry outside the forest industry. Demand for management consulting services was boosted by competitiveness enhancement projects, industry restructuring, operations improvement projects and the challenges and opportunities related to bioenergy currently facing the forest industry.
 
The Forest Industry business group's net sales for 2007 were 276.9 (224.9) million and operating profit was EUR 39.0 (22.9) million. The favourable development was due to global networking, major inputs in emerging markets, a more diversified range of services and successfully implemented projects.
 
The order stock is good, amounting to EUR 123.8 (111.4) million at the end of the year. The most important new projects during the review period were the implementation of the new bleached hardwood kraft pulp mill of VCP - MS Celulose Sul Mato-Grossense Ltda in Brazil (EUR 54 million), Stora Enso's board machine rebuild at Wisconsin Rapids in the United States, the rebuilds of two paper machines for Billerud AB in Sweden, Holmen Paper AB's TMP plant upgrade at the Braviken mill in Sweden (EUR 2 million), the new containerboard production line project with Mondi Packaging Paper GmbH (EUR 12 million) and Portucel's new fine paper line in Portugal (EUR 10 million).
 

Forest Industry, EUR million
2007
2006
2005
 
 
 
 
Net sales
276.9
224.9
199.3
Operating profit
39.0
22.9
19.7
Operating profit, %
14.1
10.2
9.9
Order stock
123.8
111.4
97.3
Personnel at year-end
2961
2418
2123
 
Infrastructure & Environment
 
Demand for infrastructure- and environment related services remained stable in 2007. The business group continued to strengthen its position in local and international markets. Pöyry's ability to react quickly to changes in the business environment represents a significant competitive advantage. Also, combining the company's global network of experts with a local presence in key markets is becoming increasingly important.
 
In Europe, new growth markets in 2007 were Romania and Bulgaria, who have received major funding from the European Union. In Asia, India and Vietnam became more important, in addition to the previously established markets. The private sector accounted for a more diversified proportion of the clientele. The business group participated in an increasing number of Public Partnership Projects. Operated by private stakeholders, these projects get their financing from both public and private sources. There was also major progress in top-level management consulting work. For example, Pöyry was appointed engineering consultant for the water supply development project of the City of Paris.
 
Boosted by the good demand situation and increased productivity achieved through streamlining of operations, the Infrastructure & Environment business group's net sales and operating profit increased during the year. Net sales for 2007 amounted to EUR 222.5 (201.8) million and operating profit was EUR 16.8 (13.0) million. By systematically combining its expertise in different business units and across national borders the business group successfully expanded its service capabilities to provide clients with a more comprehensive package of services. This has also boosted net sales.
 
The order stock was good, amounting to EUR 226.3 (191.0) million at the end of the year. The most important new projects were the contract with the German Railways (DB ProjektBau GmbH) for improvement of the railway network of Berlin (EUR 3 million), waste water management projects in Brno, Czech Republic and Paris, France (totally EUR 2.5 million), the traffic control system project with ASFINAG (Autobahnen- und Schnellstrassen- Finanzierungs- Aktiengesellschaft) Verkehrstelematik GmbH in Linz, Austria (EUR 1.3 million), railway line projects in Algeria and Finland (totally EUR 3.5 million), the contract with the Latvian real estate company SIA Vertikala Pasaule for construction management and site inspection services in Latvia (EUR 3 million), the contract with the Finnish Rail Administration to improve the service standard on the Lahti - Luumäki railway track (EUR 3 million), the urban mass transit project in Munich, Germany, a road engineering assignment in Romania (EUR 7 million) and a railway engineering assignment, also in Romania (EUR 14 million).
 

Infrastructure & Environment, EUR million
2007
2006
2005
 
 
 
 
Net sales
222.5
201.8
164.9
Operating profit
16.8
13.0
9.2
Operating profit, %
7.5
6.4
5.6
Order stock
226.3
191.0
159.5
Personnel at year-end
2378
2207
1979
 
Development of Group structure
 
The Pöyry Group's clients are globalising and consolidating their operations. Through its comprehensive global network of offices the Group serves its clients as an adviser and project implementation specialist, globally and locally. The Pöyry Group's local network of offices offers clients a good alternative for outsourcing their engineering and project implementation services. The Group is actively expanding its office network. The Group also intends to expand its technology and know-how base by acquiring technology leaders within its main business sectors. These companies' expertise can also be efficiently marketed via the Group's global network of offices.
Turnkey project activity has decreased in recent years, accounting for 1.4 per cent of consolidated net sales in 2007. Turnkey projects are only undertaken by the Energy business group and the objective is to keep their volume below 30 per cent of the business group's net sales. This equals about 10-15 per cent of the Group's consolidated net sales.
 
Acquisitions and divestments
 
Energy
 
Pöyry expanded its management consulting services portfolio and market presence in the energy sector by acquiring in August ECON Analyse AS of Norway, renamed Econ Pöyry AS. The company's main operational bases are in Oslo and Stavanger, Norway, Stockholm, Sweden and Copenhagen, Denmark, and it is well-established in all of its markets. The company's net sales for 2006 amounted to EUR 13 million and it employs 85 experts. Following the transaction, Pöyry further strengthened its position as the leading energy management consultant in Europe, employing 250 experts. Econ Pöyry AS was consolidated into Pöyry on 1 September 2007.
 
Pöyry divested its French subsidiary Pöyry Energy (Lyon) SAS and sold its 100 per cent ownership in the company. The reason for the sale was that the company's profile and product portfolio were not in line with the current strategy of the Energy business group. The income from the sale was EUR 0.7 million. Pöyry divested its French subsidiary Pöyry Energy (Strasbourg) SAS and sold its 100 per cent ownership in the company. The reason for the sale was that the company's profile and product portfolio were not in line with the current strategy of the Energy business group. The income from the sale was EUR 0.2 million.
 
The business group aims to expand its network of local offices in Europe, Asia, Russia and Latin America. In addition, the business group intends to expand its technological expertise, especially in the areas of renewable energy, management consulting, deep water, oil sands, oil and gas reserves, nuclear energy and environmental protection.
 
Forest Industry
 
Pöyry expanded its business in Russia by acquiring in June 70 per cent of the shares of ZAO Giprobum Engineering, renamed ZAO Giprobum-Pöyry, based in St. Petersburg, Russia. The transaction includes an option to acquire the remaining 30 per cent of the shares during the first half of 2009. The company's services include investment studies, services related to permitting and agreements with authorities, plant engineering, and construction management services. ZAO-Giprobum Pöyry has a wide clientele both in pulp and paper and mechanical wood industries in Russia, Ukraine, Belarus and several Eastern European countries. The company's net sales are about EUR 5 million and it has a staff of 260. ZAO Giprobum-Pöyry was consolidated into the Pöyry Group on 1 July 2007.
 
In September Pöyry acquired 100 per cent of the share capital and votes of Insinööritoimisto Pöysälä & Sandberg Oy, a Finnish company specialising in structural engineering. Pöyry Civil Oy and Pöysälä & Sandberg together constitute the largest structural engineering company in the industrial investment building sector in Finland. Pöysälä & Sandberg specialises in industrial building construction and structural engineering of office and commercial buildings. Its net sales amounted to EUR 7.5 million in 2006. The company employs about 100 experts in offices in Helsinki, Kuopio and Oulu in Finland. Insinööritoimisto Pöysälä & Sandberg Oy was consolidated into the Pöyry Group as of 1 September 2007.
 
Pöyry expanded its management consulting services portfolio in North America by acquiring Perforex Inc., Canada. The company's main operational bases are in Toronto, Canada, and Atlanta and Portland (Oregon), USA. The transaction strengthened Pöyry's position as the leading forest industry management consultant in the world, employing more than 300 experts globally. The company's net sales in 2006 amounted to EUR 4.5 million and it employs 35 experts. Perforex Inc. was consolidated into Pöyry as of 1 December 2007.
 
The business group's office network will be expanded in the next few years in line with market developments. The expansion is likely to take place primarily in emerging markets, where investment activity is expected to grow, and partly in Europe and North America, where demand for Pöyry's services is expected to increase in the areas of biofuels, chemical industry, maintenance engineering and other local services.
 
Infrastructure & Environment
 
Pöyry strengthened its quantity and cost calculation know-how by acquiring in May 100 per cent of the shares of Insinööritoimisto Rakennuslaskenta NHL Oy, Finland. Rakennuslaskenta NHL had net sales of more than EUR 2 million in 2006. The company was consolidated into the Pöyry Group as of 1 June 2007 and was merged to Pöyry Building Services Oy as of 31 December 2007.
 
In June Pöyry acquired 70 per cent of the shares of Evata Worldwide Oy, a Finnish architectural design and real estate consulting firm. The deal includes an option to acquire the remaining 30 per cent of the company's shares in 2010, at the earliest. Evata employs about 100 experts in its headquarters in Helsinki, and in offices in Tallinn, Estonia, and Beijing, China. It also has a representative office in St. Petersburg, Russia. Evata offers architectural and interior design, workplace design, office property consulting and services related to real estate development. The company's annual net sales are about EUR 10 million. Following this acquisition, Pöyry's real estate expertise covers all major sectors of the business: project management, design, real estate consulting and architecture. Evata Worldwide Oy was consolidated into the Pöyry Group as of 1 July 2007.
 
In October Pöyry expanded its waste management services portfolio and market presence in the environmental business by acquiring Ingenieurgemeinschaft Witzenhausen Fricke & Turk GmbH, Germany. The acquisition strengthens Pöyry's position in Germany as a leading consultant in environmental consulting and engineering, employing more than 300 experts. The company's net sales in 2006 amounted to EUR 2 million and it employs 20 experts. Ingenieurgemeinschaft Witzenhausen Fricke & Turk GmbH was consolidated into the Pöyry Group as of 1 October 2007.
 
In November Pöyry strengthened the operations of its real estate and telecommunications business by acquiring 100 per cent of the shares of Quatrocon Oy, a company specialising in HVAC design. Its office is situated in Espoo, Finland, and it also has experience of the Russian market. The company's net sales amounted to EUR 1.1 million in 2006 and it employs 14 experts. The company was consolidated into the Pöyry Group as of 1 December 2007.
 
In December Pöyry expanded its presence in the water and environment market in Asia by acquiring 67 per cent of the shares of IDP Consult Incorporated. IDP is a consulting company based in Manila, Philippines serving mainly international donors such as the Asian Development Bank and World Bank in technical assistance projects in the water sector. The company's net sales amounted to EUR 0.8 million in 2006 and it employs about 30 experts. IDP Consult Incorporated will be consolidated into the Pöyry Group as of 1 January 2008.
 
The business group aims to expand its network of local offices in Europe and Asia.
 
Order stock
 
The Group's order stock increased during the financial year. At the end of 2007, the order stock totalled EUR 562.8 million, compared with EUR 507.6 million at the end of 2006. The order stock of the consulting and engineering business increased by 50.6 million during the year.
 
The share of consulting services and operation and maintenance services of the order stock has increased. Assignments in these areas are short-term and are partly booked under net sales without being recorded in the order stock.
 

Order stock, EUR million
2007
2006
2005
 
 
 
 
Consulting and engineering
551.4
500.8
428.1
EPC
11.4
6.8
24.0
Order stock, total
562.8
507.6
452.1
 
Human resources
 
Personnel structure
 
The total number of personnel in the Group increased during 2007. The Group had an average of 6852 employees during the year, which is 13.5 per cent more than in 2006. The number of personnel at the end of the year was 7269. Mergers and acquisitions added 637 people to the total. Of the total personnel, 91 per cent were employed in operative project work.
 

Personnel, average
2007
2006
2005
 
 
 
 
Operative personnel
6270
5514
4936
Administrative personnel
582
524
487
Personnel, total
6852
6038
5423
 
Salaries and bonuses
 
Salaries and bonuses in the Pöyry Group are determined on the basis of collective and individual agreements, the employee's performance and the required qualification level. Supplementing the basic salary, the Group has implemented bonus schemes which are primarily aimed at Group companies' line management. In addition, separately agreed incentive schemes were implemented in selected projects. In 2007, salaries paid totalled EUR 313.4 million, of which bonuses accounted for EUR 15.6 million.
 

Salaries and bonuses, EUR million
2007
2006
2005
 
 
 
 
Salaries and remunerations
297.8
262.3
223.6
Bonuses
15.6
11.1
9.3
Salaries and bonuses, total
313.4
273.4
232.9
 
Human resources management
 
The year under review was a year of strong growth for Pöyry. To make the best possible use of its resources for project work, the company utilised its global office network more effectively than ever before. To ensure that the Pöyry Group's capabilities will develop in accordance with business needs, the principles and actions for competence development are defined as a part of the annual strategy process.
 
Pöyry's Human Resources function supported the company's growth by focusing on development of management and leadership skills and on promoting internal staff mobility. Uniform operating principles were promoted in 2007 by intensifying the co-operation within the Group's HR network and by developing joint operating models. Incentive systems were reviewed and benchmarked during the year. As a result, e.g. a new performance share plan was approved at the end of the year. The agreed changes in common incentive systems is an important part of Pöyry's overall reward programme, which will be developed further during 2008. The benefits of adopting aligned operating practices are already clearly visible.
 
Research and development
 
The Pöyry Group's research and development co-operation committee consists of representatives of the business groups, IT staff and the company's management. Its main objectives are to promote internal research and development, to assist in obtaining supplementary financing and engaging clients in development processes, and to keep the research and development focus on the Group's strategic objectives.
 
The Pöyry Group is engaged in hundreds of research and development projects each year, relying on the expertise, experience and innovativeness of its employees. Research and development efforts are conducted in partnership with clients and research institutions, often in an interdisciplinary manner, making use of the Group's technical and technological expertise to improve the competitiveness of the Group and its clients.
 
The income and expenses attributable to research and development are mostly part of the Group's client work and cannot therefore be defined in exact monetary terms. The income and expenses have been taken into account in the statement of income for the financial year.
 
Capital expenditure and depreciation
 
The Group's capital expenditure totalled EUR 53.3 million, of which EUR 9.1 million consisted of computer software, systems and hardware and EUR 44.2 was due to business acquisitions.
 

Capital expenditure and depreciation, EUR million
2007
2006
2005
 
 
 
 
Capital expenditure, operative
9.1
9.8
8.0
Capital expenditure, shares
44.2
27.9
17.8
Capital expenditure, total
53.3
37.7
25.8
Depreciation
8.4
7.8
7.9
 
Financing
 
The Group's liquidity remained good during the financial year. At the end of the year, the Group's cash and cash equivalents totalled EUR 98.7 (74.9) million. Interest-bearing debts amounted to EUR 8.9 (13.6) million. The net debt/equity ratio (gearing) was -47.4 (-37.6) per cent, which was clearly better than the target of keeping gearing below 30 per cent.
 

Financing, EUR million
2007
2006
2005
 
 
 
 
Cash and cash equivalents
98.7
74.9
64.5
Interest-bearing debts
8.9
13.6
10.7
Unutilised credit facilities
37.9
25.3
31.1
Gearing, %
-47.4
-37.6
-36.1
Cash flow before financing
58.6
26.4
18.6
 
Assessment of operational risks and uncertainties
 
In the Pöyry Group risks are managed in accordance with the Group's risk management policy and instructions. The various risks related to the Group's business operations are being monitored in line with a risk classification of external and internal risks. Internal risks include strategic and operational risks, and financing risks. If realised, identified risks could have a material negative impact on Pöyry's business operations, earnings, financial position or reputation. All identified major risks have been quantified and qualified and measures defined for managing them. The effectiveness of risk management actions is being regularly monitored in the Group. The most significant group-level risks identified in the group-wide risk management process of 2006 are described in the following.
 
External risks
 
With the exception of the risk related to the general economic development, no major external risks were identified in the risk management process of 2007.
 
Strategic risks
 
Pöyry's most significant strategic risks are related to business development and to the adoption of the one-brand strategy.
 
The most significant strategic risks related to business development consist of risks concerned with company acquisitions, and the establishment of operations in new markets. Risks related to acquisitions are managed by complying with Pöyry's acquisition policy, and the operating procedures and models prepared on the basis of it. To manage the risks related to establishment in new markets, market-specific strategies have been prepared for new market areas. In addition to acquisitions, organic growth is an important part of Pöyry's growth strategy. In order to reach the growth targets plans have been made to ensure the availability of required resources.
 
The Group adopted a one-brand strategy during 2006. The risks related to the Group's reputation and international recognition arising from the one-brand strategy are addressed by introducing brand management procedures, which are currently under preparation, and by adhering to strict business practices, as stipulated in the Group's operating guidelines.
 
Operational risks
 
Pöyry's most significant operational risks are related to its assignments and staff.
 
Pöyry's assignments involve a risk that the service or work performed contains a professional error, oversight or some other undesirable effect, which causes a significant economic or other liability. The following procedures are designed to manage these risks:
- adhering to quality systems, operating procedures and approval procedures
- appointing a supervisory body for major projects
- training project managers and staff for project management and project administration tasks
- complying with instructions for the processing of proposals and contracts, especially with a view to limiting contractual liabilities. However, the instructions for limiting contractual liabilities cannot always be taken into account particularly in dealing with public-sector clients
- maintaining a group-wide liability insurance programme to cover liability risks related to project work. Insurances do not, however, cover all liability risks
 
Pöyry's business success depends on its professional staff. The availability of qualified professionals is an important factor for the growth and profitability of the business. Group-wide HR processes are being developed and implemented, including recruitment of additional HR personnel.
 
Financial risks
 
The financial risks have been described in the Notes to the Financial Statements.
 
Realisation of risks, court processes
 
No such risks, court processes, other legal proceedings or actions by authorities were realised in the risk management process during 2007 which would have had a material impact for the Group.
 
Share capital and shares
 
The share capital of Pöyry Plc was on 31 December 2006 EUR 14 545 036 and the total number of shares was 58 180 144. During 2007 Pöyry Plc issued 298 702 new shares as compensation in an acquisition of a company. As a result, the number of shares increased by 298 702, the share capital remaining unchanged. During 2007 173 768 new shares were subscribed with stock options 2004A and accordingly the share capital increased by EUR 43 442. On 31 December 2007 the share capital of Pöyry Plc was EUR 14 588 478 and the total number of shares was 58 652 614.
 
Authorisation to issue shares
 
The Annual General Meeting on 5 March 2007 authorised the Board of Directors to decide to issue new shares and to convey the company's own shares held by the company in one or more tranches. The share issue can be carried out as a share issue against payment or without consideration on terms to be determined by the Board of Directors and in relation to a share issue against payment at a price to be determined by the Board of Directors.
 
A maximum of 11 600 000 new shares can be issued. A maximum of 5 800 000 own shares held by the company can be conveyed. The authorisation is in force until 10 March 2008.
 
During the period under review Pöyry Plc issued new shares as compensation in the acquisition of Insinööritoimisto Pöysälä & Sandberg Oy. The acquisition was realised as an exchange of shares where the sellers were granted 298 702 new shares in Pöyry Plc. After this issue the number of new shares which can be issued is not more than 11 301 298 new shares.
 
Authorisation to acquire the company's own shares
 
The Annual General Meeting on 5 March 2007 authorised the Board of Directors to decide to acquire the company's own shares with distributable funds on the terms given below. The acquisition of shares reduces the company's distributable non-restricted shareholders' equity.
 
A maximum of 5 800 000 shares can be acquired. The company's own shares can be acquired in accordance with the decision of the Board of Directors either through public trading or by public offer at their market price at the time of purchase.
 
The authorisation is in force until 10 March 2008.
 
For the implementation of the performance share plan 2008-2010, the Board of Directors has further resolved to exercise the authorisation by the Annual General Meeting on 5 March 2007 to acquire the company's own shares. According to the resolution of the Board of Directors, a maximum of 400 000 shares may be acquired. The Board of Directors authorised the President and CEO to decide on the details and implementation of the acquisition of own shares.
 
The Board has not exercised the authorisation during the period under review.
 
Shares can be acquired with funds distributable as profit. The shares will be acquired in order to strengthen the company's capital structure and also to be used as compensation in business acquisitions or in acquisition of assets related to the company's business.
 
Pöyry Plc does not hold its own shares. A subsidiary of Pöyry Plc owns 8914 Pöyry Plc shares with a nominal value of EUR 2 228.50, which equals 0.02 per cent of the total number of shares and voting rights.
 
The afore mentioned decisions made by the Annual General Meeting was published in its entirety as a stock exchange notice on 5 March 2007.
 
Stock options
 
Pöyry Plc issued in 2004 stock options to the management of the Group as well as to a wholly-owned subsidiary of Pöyry Plc. The number of stock options is 550 000, entitling to subscription of four shares each, i.e. a total of 2 200 000 shares in Pöyry Plc.
 
The share subscription periods are for stock options 2004A (660 000 shares) between 1 March 2007 and 31 March 2010, for 2004B (660 000 shares) between 1 March 2008 and 31 March 2011, and for 2004C (880 000 shares) between 1 March 2009 and 31 March 2012. All stock options have been issued and their receipt confirmed.
 
During the financial year 173 768 new shares were subscribed with stock options 2004A.
 
Performance share plan 2008-2010
 
In December the Board of Directors of Pöyry Plc approved a new share-based incentive plan for key personnel.
 
The plan includes three earning periods which are the calendar years 2008, 2009 and 2010. The rewards will be paid partly in the company's shares and partly in cash in 2009, 2010 and 2011. Shares must be held for a period of two years from the transfer date.
 
In the first earning period 2008, the incentive plan will include approximately 300 persons. The value of the plan will correspond to 270 000 shares, if the performance of the company is in line with the earnings criteria for target performance set by the Board of Directors. If the company's performance exceeds the target and reaches maximum performance, as defined by the Board, the value of the plan can reach up to the value of 540 000 shares.
 
Board of Directors' proposal
 
The parent company of Pöyry Group, Pöyry Plc's net profit for 2007 was EUR 32 050 336.92 euros and retained earnings was EUR 19 008 344.17 thus the total amount of distributable earnings was EUR 51 058 681.09. The Board of Directors of Pöyry Plc proposes to the Annual General Meeting on 10 March 2008 that a dividend of EUR 0.65 (0.50) per share be paid for the year 2007. The number of shares is 58 652 614 and the total amount of dividends thus EUR 38 124 199.10. The proposed dividend corresponds to 73.9 (86.2) per cent of the earnings per share for the financial year. The Board of Directors proposes that the dividend be paid on 20 March 2008.
 
Board of Directors and President
 
Members of the Board of Directors of Pöyry Plc elected in the Annual General Meeting are Henrik Ehrnrooth (Chairman), Heikki Lehtonen (Vice Chairman), Pekka Ala-Pietilä, Matti Lehti, Harri Piehl, Karen de Segundo and Franz Steinegger.
 
President and CEO of the company is Mr Erkki Pehu-Lehtonen, M.Sc. (Eng.) and Deputy to the President and CEO is Mr Teuvo Salminen, M.Sc. (Econ.).
 
On 22 January 2008 the Board of Directors appointed Heikki Malinen new President and CEO of Pöyry Plc. Heikki Malinen (45) holds an MBA from Harvard and a Master of Science degree in Economics. Mr Malinen will take up the position of President and CEO of Pöyry as of 1 June 2008. Erkki Pehu-Lehtonen, current President and CEO of Pöyry, will continue with advisory assignments from the Board.
 
Auditors
 
Auditors have been KPMG Oy Ab, Authorised Public Accountants, with Mr Sixten Nyman, Authorised Public Accountant, as responsible auditor.
 
Prospects
 
Energy
 
The good economic development in China, Russia and Latin America, combined with the expansion of the EU, create favourable conditions for growth in demand for energy-related services. The EU's expanding energy legislation will continue to boost demand for management consulting services in the energy sector. In addition, environmental legislation, focused in particular on combating climate change, will boost demand for services related to renewable energy and power plant modernisation. The price of crude oil is not expected to decline much, which creates new business opportunities in the oil and gas sectors. In the thermal power sector, clients' actions will focus on diversifying the structure of their energy supply to secure the continued availability of energy. Nuclear power will acquire greater importance in diversifying the energy supply. The Energy business group has a strong position and a good order stock. The business group's operating profit will improve in 2008.
 
Forest Industry
 
Overall demand for engineering services is not expected to change much during 2008. Chemical pulp mill investments will mostly take place in South America, Asia and Russia. The focus of paper machine investments will be in the emerging markets of Asia and in some economies in transition. Because of overcapacity and cost pressures the challenging situation in the European and North American forest industry will continue. Demand for project implementation and local services will be promoted by new investments in biofuels and chemical industry. To improve the competitiveness of the forest industry, new solutions and actions will be needed to improve the efficiency of operations and overall productivity. Possible forest industry restructuring measures may result in increased demand for management consulting and investment banking services. The Forest Industry business group's operating profit will remain stable in 2008, provided that the world economic situation will not deteriorate materially from its current level.
 
Infrastructure & Environment
 
Transportation system investments will increase in Eastern Europe, Asia and Latin America. The investment growth is supported by inputs in this sector by various financial institutions. Transportation system investments in Western Europe will remain stable. Climate change and environmental problems create a need for services in the water and environment sector. The strong growth of construction will continue in Russia. The volume growth of construction in the Finnish market is expected to level off during 2008. The business group's comprehensive service packages and its focus on specific competence areas will improve its competitiveness. The strongly increased order stock and the good market situation create opportunities for increasing the business group's operating profit in 2008.
 
Group
 
The Group has a strong market position in all of its business areas. The order stock is good and has increased by EUR 55 million during 2007. Consolidated net sales will increase in 2008. Profit before taxes is expected to improve in 2008. The repercussions in other national economies of the uncertainty in the US economy may have a negative impact on investment demand during 2008.