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Harvia Oyj: Harvia is planning an initial public offering and listing on the official list of Nasdaq Helsinki Ltd

HARVIA PLC PRESS RELEASE 5 MARCH 2018 KLO 8:00 A.M. EET

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, NEW ZEALAND, AUSTRALIA, JAPAN, HONG KONG, SINGAPORE OR SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL.

Harvia Plc (Harvia” or the Company”) is planning an initial public offering (IPO”) and listing of its shares on the official list of Nasdaq Helsinki Ltd (Nasdaq Helsinki”).

Harvia is one of the leading manufacturers of sauna and spa products globally, as measured by revenue[1]. Harvia’s brands and product offering are well-known in the market[2] and the Company’s comprehensive product offering strives to meet the needs of the international sauna and spa market, and of both private and professional customers. Harvia’s revenues amounted to EUR 60.1 million in 2017, its operating profit was EUR 9.3 million and adjusted operating profit EUR 10.7 million during the same period.

Tapio Pajuharju, CEO of Harvia:

“Harvia has more than 60 years of experience in the sauna and spa industry. During that time we have notably expanded to international markets and grown into one of the globally leading manufacturers of sauna and spa products. During CapMan’s ownership, we have expanded our operations, both organically and through acquisitions, while maintaining strong margins. We believe that our success lies with our capable personnel, our efficient production, and our excellent Research and Development team, thanks to which we have a competitive and comprehensive offering. We are proud of our company and its robust historical growth. We strongly believe that we are well equipped to continue on this path of profitable growth and that the contemplated IPO would support our growth strategy.”

Olli Liitola, Chairman of the Board of Directors:

“We are more than satisfied with Harvia’s operational performance in the past years. Harvia is a strong player in a historically stable and growing market. The contemplated IPO and listing mark an important milestone in Harvia’s development and enables the company’s continued growth track, strengthens the Harvia brand, and provides further support in the recruitment and engagement of key personnel.”

The IPO

The contemplated IPO is expected to consist of a primary offering, in which the Company would issue new shares, and a secondary share sale by the largest shareholders, CapMan Buyout X Fund A L.P and CapMan Buyout X Fund B Ky, (together CapMan”) as well as certain other shareholders. The shares would be offered to private individuals and entities in Finland, institutional investors in Finland and internationally pursuant to the applicable legislation, and permanent employees and senior management of Harvia in Finland and in Austria.

The primary offering is intended to raise gross funds of approximately EUR 45 million, which would be used to strengthen Harvia’s capital structure and support the Company’s strategy. The Company and its current shareholders selling their shares in the IPO would commit to customary lock-up arrangements. CapMan would remain as a significant shareholder also after the IPO.

The objective of the contemplated IPO would be to improve the Company’s ability to implement its strategy by providing access to the capital markets and strengthening the Company’s capital structure as well as increasing Harvia’s recognition among customers and attractiveness as an employer. The potential listing would also broaden the Company’s ownership base, increase the liquidity of the shares in the Company and enable the use of the Company’s shares as a means of consideration in potential acquisitions and remuneration of key personnel.

Danske Bank A/S, Finland Branch is acting as the global coordinator in the contemplated IPO. Handelsbanken Capital Markets is acting as bookrunner (together with the global coordinator, the Bookrunners”). Borenius Attorneys Ltd is acting as legal advisor to the Company and Castrén & Snellman Attorneys Ltd is acting as legal advisor to the Bookrunners.

Harvia’s strengths

Harvia’s operations are characterised by the following key strengths:

  • Operates in a historically stable and growing market
  • Leading position in the Company’s most important geographical markets
  • Strong brand and diverse and comprehensive product offering
  • Integrated and efficient business model
  • Long-standing customer relationships and diverse distribution channels
  • Historically stable and strong profitability and cash flow
  • Skilled and experienced management team and personnel

Harvia’s strategy
Harvia’s target is to be the leading player in the sauna and spa market. Harvia’s comprehensive product offering strives to meet the needs of the sauna and spa market. Harvia’s product offering covers all three sauna types, i.e., traditional saunas, steam saunas and infrared saunas.

Harvia’s strategy includes increasing the value of the average purchase, selected geographical expansion and improving operational efficiency. Harvia strives to increase the value of the average purchase by increasing upselling, i.e., the sale of control units, safety rails and other accessories in connection with the sale of a heater. Harvia also seeks to expand its offering in higher price product segments and is launching a new brand SENTIO by Harvia in the highest price segment during the first half of 2018. Harvia’s aim is to increase its market share in its core markets of Finland, Scandinavia, Germany, other EU countries, Russia and North America by strengthening its distribution network and improving availability and visibility of a product offering tailored to each market. According to the management, Harvia’s facilities in Muurame are highly efficient and its operations are flexible and integrated. The Company aims to continuously improve operational efficiency by optimising geographic footprint of production, enhancing procurement and logistics, optimising product offering by designing easy-to-manufacture products and increasing capacity utilisation.

Harvia’s financial targets and dividend policy

Harvia’s Board of Directors have set the following long-term financial targets:

  • Annual revenue growth above five (5) per cent, on average
  • Adjusted operating profit margin of 20 per cent
  • Net debt per adjusted EBITDA in the range of 1.5x-2.5x[3]
  • According to the Company’s dividend policy, it targets a regularly increasing dividend with a bi-annual dividend payout of at least 60 per cent of net income, in total

In the current year, the Company intends to pay only the latter dividend instalment in accordance with its dividend policy and as such the Board of Directors intends to decide on an estimated dividend payment of approximately EUR 3.4 million in the latter half of 2018 based on the authorisation.

Harvia’s financial highlights

Harvia’s average organic growth has been four per cent between 2015 and 2017. In 2017, Harvia’s revenue grew by 20 per cent to EUR 60.1 million and adjusted operating profit was EUR 10.7 million, corresponding to a 17.8% adjusted operating margin. The Company’s operating profit was EUR 9.3 million.

1 January – 31 December
Key Performance Indicators



EUR million (unless otherwise indicated)
2017
(IFRS)
2016
(IFRS)
2015
(IFRS)
(Unaudited, unless otherwise indicated)
Revenue[4] 60.1 50.1 46.4
Organic growth[5], % 3.9 3.8
Constant currency growth[6], % 18.9 8.2
EBITDA[7] 11.2 11.3 12.2
EBITDA margin, % 18.6 22.6 26.4
Adjusted EBITDA[8] 12.6 11.7 12.2
Adjusted EBITDA margin, % 21.0 23.3 26.3
Operating profit[9] 9.3 9.7 10.6
Operating profit margin, % 15.4 19.4 22.9
Adjusted operating profit[10] 10.7 10.1 10.6
Adjusted operating profit margin, % 17.8 20.1 22.9
Profit for the period4 2.9 3.3 3.8
Basic EPS, EUR[11] 0.30 0.35 0.40
Investments in tangible and intangible assets[12] -1.2 -1.0 -0.7
Operating free cash flow[13] 9.0 10.8 11.7
Cash conversion[14], % 71.6 92.6 95.7
Capital employed excluding goodwill[15] 32.8 30.5 29.2
Adjusted return on capital employed (ROCE)[16], % 32.7 32.9 36.4

Press event

Harvia will host a press conference today, 5 March 2018 at Nasdaq Helsinki (Fabianinkatu 14, Helsinki) at 11:00 a.m. EET.

Further enquiries

Tapio Pajuharju, CEO, tel. + 358 50 577 4200, tapio.pajuharju@harvia.fi
Ari Vesterinen, CFO, tel. +358 40 505 0440 ari.vesterinen@harvia.fi
Olli Liitola, Chairman of the Board of Directors, tel. +358 40 060 5040, olli.liitola@capman.com

Harvia in short

Harvia is one of the leading companies operating in the sauna and spa market globally, as measured by revenue[17]. Harvia’s brands and product offering are well-known in the market[18] and the Company’s comprehensive product offering strives to meet the needs of the international sauna and spa market, of both private and professional customers.

Harvia’s revenue amounted to EUR 60.1 million in 2017, its operating profit was EUR 9.3 million and adjusted operating profit EUR 10.7 million during the same period. The Company employs some 365 professionals in Finland, China and Hong Kong, Romania, Austria, Germany and Estonia. The company’s headquarters in Muurame, Finland are adjacent to its largest sauna and sauna component manufacturing facility.

Disclaimer

The information contained herein is not for publication or distribution, directly or indirectly, in or into the United States, Canada, New Zealand, Australia, Japan, Hong Kong, Singapore or South Africa. The information contained herein does not constitute an offer of securities for sale in the United States, nor may the securities be offered or sold in the United States absent registration or an exemption from registration as provided in the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder. Harvia Plc (the “Company”) does not intend to register any portion of the contemplated offering in the United States or to conduct a public offering of securities in the United States.

The issue, exercise and/or sale of securities in the initial public offering are subject to specific legal or regulatory restrictions in certain states. The Company, Danske Bank A/S, Finland Branch and Handelsbanken Capital Markets, a part of Svenska Handelsbanken AB (publ), assume no responsibility in the event there is a violation by any person of such restrictions.

The information contained herein shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale or offer of the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any such jurisdiction. Investors must neither accept any offer for, nor acquire, any securities referred to in this release, unless they do so on the basis of the information contained in the prospectus published or offering circular distributed by the Company.

The Company has not authorized any offer to the public of securities in any Member State of the European Economic Area. With respect to each Member State of the European Economic Area other than Finland, and which has implemented the Prospectus Directive (each, a “Relevant Member State”), no action has been undertaken or will be undertaken to make an offer to the public of securities requiring publication of a prospectus in any Relevant Member State. As a result, the securities may only be offered in Relevant Member States (a) to any legal entity which is a qualified investor as defined in the Prospectus Directive; or (b) in any other circumstances falling within Article 3(2) of the Prospectus Directive. For the purposes of this paragraph, the expression an “offer of securities to the public” means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to exercise, purchase or subscribe the securities, as the same may be varied by any measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

This communication is directed only at (i) persons who are outside the United Kingdom or (ii) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) and (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2) of the Order (all such persons together being referred to as “Relevant Persons”). Any investment activity to which this communication relates will only be available to and will only be engaged with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

Forward-looking statements

Certain statements in this communication are “forward-looking statements”. Forward-looking statements include statements concerning plans, assumptions, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, the Company’s competitive strengths and weaknesses, plans or goals relating to financial position, future operations and development, its business strategy and the anticipated trends in the industry and the political and legal environment in which it operates and other information that is not historical information, such as revenue growth, EBITDA growth, cost savings, investments, the contemplated IPO and listing, future cash flow generation, operating profit margin, operating capital expenditure, ratio of net debt and EBITDA, revenue, and operating results. In some instances, they can be identified by the use of forward-looking terminology, including the terms “believes”, “intends”, “may”, “will” or “should” or, in each case, their negative or variations on comparable terminology.

Forward-looking statements in this release are based on various assumptions, many of which in turn are based on assumptions. By their very nature, forward-looking statements involve inherent risks, uncertainties and assumptions, both general and specific, and the risk exists that the predictions, forecasts, projections, plans and other forward-looking statements will not be achieved. Given these risks, uncertainties and assumptions, you are cautioned not to place undue reliance on such forward-looking statements. Any forward-looking statements contained herein speak only as at the date of this release. Save as required by law, the Company and the Bookrunners do not intend and do not assume any obligation, to update or correct any forward-looking statement contained herein.



[1] International Management Consultant Analysis conducted in autumn 2017 and commissioned by Harvia.

[2] The Harvia brand was the most recognised sauna brand in a survey of 171 Finnish consumers, and in a survey of Finnish, Swedish, German, Russian and American consumers (altogether 810 consumers) based on International Management Consultant Analysis conducted in autumn 2017 and commissioned by Harvia.

[3] Does not take into account the effect of the future changes in IFRS standards

[4] Audited

[5] Revenue growth of companies and businesses that have belonged to the group for over 12 months.

[6] Revenue translated at average foreign exchange rates of previous year divided by previous year’s revenue.

[7] EBITDA is operating profit before depreciation and amortisation

[8] Adjusted EBITDA is EBITDA before items affecting comparability. Items affecting comparability are unusual material items outside the ordinary course of business, which relate to i) costs related to the contemplated listing, ii) strategic development projects, iii) acquisition and integration related expenses, iv) restructuring expenses, and v) net gains or losses on sale of assets and grants received.

[9] Operating profit is profit before income taxes, finance income and finance costs. Audited.

[10] Adjusted operating profit is operating profit before items affecting comparability.

[11] Profit for the period attributable to the owners of the parent divided by weighted average number of shares outstanding. Audited.

[12] Investments in tangible and intangible assets as presented in the consolidated statement of cash flows. Audited.

[13] Operating free cash flow is adjusted EBITDA added/subtracted by the change in net working capital in consolidated statement of cash flows less investments in tangible and intangible assets. When calculating operating free cash flow, change in net working capital represents the change in working capital in the consolidated statement of cash flows (which includes increase / decrease in trade and other receivables, inventories and trade and other payables).

[14] Cash conversion is operating free cash flow divided by adjusted EBITDA.

[15] Capital employed excluding goodwill is total equity and net debt less goodwill. Net debt is shareholder loans and current and non-current loans from credit institutions less cash and cash equivalents.

[16] Adjusted return on capital employed (ROCE) is adjusted operating profit divided by average capital employed excluding goodwill.

[17] International Management Consultant Analysis conducted in autumn 2017 and commissioned by Harvia.

[18] The Harvia brand was the most recognised sauna brand in a survey of 171 Finnish consumers, and in a survey of Finnish, Swedish, German, Russian and American consumers (altogether 810 consumers) based on International Management Consultant Analysis conducted in autumn 2017 and commissioned by Harvia.