Harvia’s Financial statements bulletin 2020: Significant growth of revenue and profitability continued, driven by exceptional demand

Stock Exchange Release | 11 February 2021

Harvia Plc, Financial statements bulletin, 11 February 2021 at 9.00 a.m. EET

This release is a summary of Harvia Plc’s Financial statements bulletin 2020. The complete report is attached to this release as a pdf file. It is also available on Harvia’s website at https://harviagroup.com/.  

Highlights of the review period

October–December 2020:

  • Revenue increased by 70.0% to EUR 35.2 million (20.7). At comparable exchange rates, revenue increased by 76.7% to EUR 36.6 million. Organic revenue growth was 39.1%.
  • Adjusted operating profit increased to EUR 8.8 million (4.2), making up 24.9% (20.1) of the revenue. At comparable exchange rates, the adjusted operating profit increased to EUR 9.0 million (24.6% of the revenue).
  • Operating profit was EUR 8.7 million (3.9), making up 24.7% (18.9) of the revenue.
  • Operative free cash flow amounted to EUR 10.3 million (7.0).

January‒December 2020:

  • Revenue increased by 47.3% to EUR 109.1 million (74.1). At comparable exchange rates, revenue increased by 49.9% to EUR 111.1 million. Organic revenue growth was 28.0%.
  • Adjusted operating profit was EUR 24.4 million (13.9), making up 22.4% (18.7) of the revenue. At comparable exchange rates, the adjusted operating profit increased by 78.5% to EUR 24.8 million (22.3% of the revenue).
  • Operating profit was EUR 22.4 million (13.3), making up 20.5% (18.0) of the revenue.
  • Operating free cash flow amounted to EUR 28.7 million (15.2).
  • Net debt amounted to EUR 31.9 million (28.3) and leverage was 1.1 (1.7).
  • On April 30, 2020, Harvia completed the acquisition of the German EOS Group majority. The financial figures of EOS Group have been consolidated with Harvia’s figures starting from the completion of the acquisition.
  • Equity ratio was 42.0% (56.6). During the review period, Harvia took out a new long-term loan of EUR 20 million for financing the acquisition of EOS Group.
  • The Board of Directors’ dividend proposal is EUR 0.39 per share, to be paid in two instalments. In addition, a dividend of EUR 0.12 is paid to celebrate Harvia’s 70-year anniversary.
  • Harvia has taken special measures in all of its operating countries to ensure the safety of its personnel and safeguard the continuity of its operations and services in the exceptional situation caused by the COVID-19 pandemic. Despite the pandemic, we have maintained our operative and customer service capabilities close to their regular level.

Key figures

EUR million 10-12/2020 10-12/2019 Change % 1-12/2020 1-12/2019 Change %
Revenue 35.2 20.7 70.0% 109.1 74.1 47.3%
EBITDA 9.9 4.7 110.0% 26.7 16.4 62.5%
% of revenue 28.0% 22.7 %   24.5% 22.2%  
Items affecting comparability * 0.1 0.2 -76.1% 2.1 0.6 274.9%
Adjusted EBITDA ** 9.9 5.0 100.7% 28.8 17.0 69.4%
% of revenue 28.2% 23.9%   26.4% 22.9%  
Operating profit 8.7 3.9 122.1% 22.4 13.3 67.9%
% of revenue 24.7% 18.9%   20.5% 18.0%  
Adjusted operating profit ** 8.8 4.2 110.3% 24.4 13.9 76.2%
% of revenue 24.9% 20.1%   22.4% 18.7%  
Basic EPS (EUR) 0.31 0.16 98.4% 0.83 0.51 61.3%
Operating free cash flow 10.3 7.0 47.2% 28.7 15.2 89.1%
Cash conversion 104.1% 141.9%   99.7% 89.3%  
Investments in tangible and intangible assets -0.8 -0.4 117.8% -2.6 -1.8 42.1%
Net debt 31.9 28.3 12.7% 31.9 28.3 12.7%
Leverage 1.1 1.7   1.1 1.7  
Net working capital 18.0 16.8 6.6% 18.0 16.8 6.6%
Adjusted return on capital employed (ROCE) 73.3% 38.2%   73.3% 38.2%  
Equity ratio 42.0% 56.6%   42.0% 56.6%  
Number of employees at end of period 617*** 395 56.2% 617*** 395 56.2%

* Consists of items outside the ordinary course of business, relating to the Group's strategic development projects, acquisitions, restructuring expenses and loss on sale of fixed assets, and affecting comparability.

** Adjusted by items affecting comparability.

*** Includes the personnel of EOS Group, totaling 160 employees on December 31, 2020.

Financial targets and outlook

Harvia does not publish its short-term outlook. However, the company has set long-term targets related to growth, profitability and leverage. The company’s management estimates that due to the special circumstances caused by the COVID-19 pandemic, the sauna and spa market has experienced exceptionally high demand. This, however, is not expected to have an impact on the long-term growth expectations of the sauna and spa market, nor on Harvia’s long-term targets.

The company targets an average annual revenue growth of more than 5%, adjusted operating profit margin of 20% and a net debt/adjusted EBITDA between 1.5x−2.5x in the long term. The future impacts of changes in IFRS reporting standards have been excluded in the net debt/adjusted EBITDA ratio target.

Harvia targets a regularly increasing dividend with a bi-annual dividend payout of at least 60 percent of Group net income, in total.

Tapio Pajuharju, CEO:

One could hardly hope for a better performance on Harvia’s work-filled 70-year anniversary: Harvia’s business continued to pick up pace towards the end of the year, and the full year turned out exceptionally strong. When it comes to net sales, Harvia has reached a position at par with the largest player in the industry.

Sales were very strong in the fourth quarter of the year: revenue increased by 70.0 percent to EUR 35.2 million with organic revenue growth standing at 39.1 percent. At the same time, our full year figures exceeded EUR 100 million as our full-year revenue landed at EUR 109.1 million.

Most importantly, the Harvia team along with our partners has remained healthy and safe. This would not have been possible without significant efforts towards well-being and safety as well as very diligent and careful cooperation. The leap in the efficiency of the entire supply chain in a rather traditional industry is strong indication of excellent knowhow and agility. Our order book was exceptionally strong at the end of the year. This has led to somewhat longer than normal delivery times. However, due to smooth cooperation, customer satisfaction remained on its usual good level. Awesome team effort, and everyone involved deserves my warmest thanks!

Revenue growth was strong in nearly all markets and all product groups in the fourth quarter of the year. The only exceptions were Southern Europe, Asia and the Arab countries, which were clearly hit hardest by the impact of the COVID-19 pandemic. The same effect is visible in the steam generators business, where the cumulative revenue did not reach the previous year’s level.

The EOS integration has proceeded well despite the travel restrictions brought on by the pandemic, and we are almost exactly on schedule. Growing the average purchase has progressed favorably, of which a great example is the strong growth of the sauna business in both Europe and the United States. The sauna heater and component business in the United States has developed favorably. On top of this, the performance of Almost Heaven Saunas’ business and especially its own webstore and direct sales have been excellent. In Finland growth has been good and Harvia has improved its market position.

As recognition for our accomplishments and especially for the skills and efforts of our personnel, we received the Internationalization Award of the President of the Republic of Finland in November. It is an annual recognition given to Finnish, internationally successful companies and communities for their meritorious activities that have benefited the economy and business life.

In the Nordic countries, we are still a challenger, but our position has strengthened considerably. The German market has taken a turn to strong growth and both Harvia’s sales in Central Europe and EOS’s success in the premium and professional channel have been excellent. The sauna and spa market as a whole has been well supported by the health and well-being trends.

Business performance continued on a very good level and we succeeded in improving our profitability. Operating profit for the fourth quarter of the year was EUR 8.7 million (operating profit margin at 24.7%) and the operating profit for the full year reached EUR 22.4 million (20.5%). Although the sauna and spa market as a whole has experienced growth due to favorable trends, we nevertheless estimate that part of this demand is still so-called advance demand, which will level out at least partly on the medium term as the pandemic subsides.

Investments made in 2020 were started according to plan. There have been delays in machinery deliveries in the United States, and the machinery will be installed in the first quarter of 2021. However, market demand is so strong that we have accelerated screening and planning of incremental investment opportunities particularly for the AHS factory in the United States and the Harvia factory in Muurame.

In 2021, we will continue to keep our eyes focused on the cornerstones of our strategy by focusing on increasing the value of the average purchase, geographical expansion, and continuous improvement of productivity. M&A activity in the sauna and spa market increased throughout the year 2020. In line with our strategy, we continue to seek opportunities to grow in the sauna and spa market also through acquisitions.

Press conference on financial results

Harvia will hold a webcast for analysts, investors and media on February 11, 2021 at 11:00 a.m. EET. The conference will be held in English. Harvia's CEO Tapio Pajuharju and CFO Ari Vesterinen will host the event. The webcast can be followed at https://harvia.videosync.fi/2020-q4-results.

You can also participate in the conference by telephone:

Finland: +358 981 710 310

Sweden: +46 856 642 651

UK: +44 333 300 0804

US: +1 631 913 1422

PIN: 28065566#

The webcast will be recorded and the recording will be available later on the company's website at https://harviagroup.com/investor-relations/.

For further information, please contact:
CEO Tapio Pajuharju, tapio.pajuharju@harvia.fi, tel. +358 50 577 4200
CFO Ari Vesterinen, ari.vesterinen@harvia.fi, tel. +358 40 505 0440

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

Harvia’s revenue totaled EUR 109.1 million in 2020. Harvia Group employs more than 600 professionals in Finland, China and Hong Kong, Romania, Austria, United States, Germany, Estonia and Russia. The company is headquartered in Muurame, Finland, adjacent to its largest sauna and sauna component manufacturing facility.

Read more: https://harviagroup.com