Harvia’s half-year financial review 1 January – 30 June 2020

Stock Exchange Release | 13 August 2020

Harvia Plc, Half-year financial review, 13 August 2020 at 9.00 a.m. EET

Revenue and profitability increased significantly in exceptional market conditions in the second quarter

This release is a summary of Harvia Plc’s Half-year financial review January–June 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

April–June 2020

  • Revenue increased by 50.1% to EUR 25.5 million (17.0). At comparable exchange rates, revenue increased by 50.8% to EUR 25.6 million. Organic revenue growth was 32.3%.
  • Adjusted operating profit increased to EUR 5.4 million (2.8), making up 21.1% (16.5) of the revenue. At comparable exchange rates, the adjusted operating profit increased to EUR 5.3 million (20.9% of the revenue).
  • Operating profit was EUR 4.6 million (2.7), making up 17.9% (15.8) of the revenue.
  • Operative free cash flow amounted to EUR 4.5 million (2.2).
  • On April 30, 2020, Harvia completed the acquisition of the majority of the German EOS Group. The financial figures of EOS Group have been consolidated with Harvia’s figures starting from the completion of the acquisition.

January–June 2020

  • Revenue increased by 26.5% to EUR 45.9 million (36.3). At comparable exchange rates, revenue increased by 26.1% to EUR 45.8 million. Organic revenue growth was 18.1%.
  • Adjusted operating profit was EUR 9.6 million (6.8), making up 20.9% (18.7) of the revenue. At comparable exchange rates, the adjusted operating profit increased by 39.7% to EUR 9.5 million (20.7% of the revenue).
  • Operating profit was EUR 7.7 (6.5) million, making up 16.7% (18.0%) of the revenue.
  • Operating free cash flow amounted to EUR 10.4 million (3.9).
  • Net debt amounted to EUR 43.6 million (33.9) and leverage was 2.2 (2.3).
  • Equity ratio was 41.3% (56.0). During the review period, Harvia took out a new long-term loan of EUR 20 million for financing the acquisition of EOS Group.
  • 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 on their regular level.

Key figures                    

EUR million4-6/20204-6/2019Change1-6/20201-6/2019Change2019
EBITDA 5.63.562.1%
% of revenue22.0%20.4% 20.8%22.2% 22.2%
Items affecting comparability *0.80.1529.4%1.90.3646.8%0.6
Adjusted EBITDA **6.43.678.8%11.58.337.5%17.0
% of revenue25.2%21.1% 24.9%22.9% 22.9%
Operating profit4.62.770.6%7.76.517.7%13.3
% of revenue17.9%15.8% 16.7%18.0% 18.0%
Adjusted operating profit **5.42.891.6%9.66.841.3%13.9
% of revenue21.1%16.5% 20.9%18.7% 18.7%
Basic EPS (EUR)0.170.1066.9%0.300.2423.5%0.51
Operating free cash flow 4.52.2103.6%10.43.9164.5%15.2
Cash conversion70.8%62.2% 91.2%47.4% 89.3%
Investments in tangible and intangible assets-0.4-0.6-36.6%-0.7-1.1-35.4%-1.8
Net debt 43.633.928.7%43.633.928.7%28.3
Leverage2.22.3 2.22.3 1.7
Net working capital 22.320.59.0%22.320.59.0%16.8
Adjusted return on capital employed (ROCE)43.4%30.6% 43.4%30.6% 38.2%
Equity ratio41.3%56.0% 41.3%56.0% 56.6%
Number of employees at end of period563***40439.4%563***40439.4%395

* 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 150 employees on June 30, 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 although there has been a strong increase in different home improvement and renovation projects during the COVID-19 pandemic, this will have no 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. 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 net income, in total.

Tapio Pajuharju, CEO:

For Harvia, the first half of 2020 was very strong and steady despite the impacts of the COVID-19 pandemic. We have actively taken care of the health and safety of our personnel and thereby succeeded in maintaining good operational capability.

During the review period, Harvia’s revenue increased significantly to EUR 45.9 million, representing growth of more than 25 percent year-on-year. Sales growth further accelerated during the second quarter, our sales reaching EUR 25.5 million. The year-on-year increase amounted to 50.1 percent, of which 32 percent was organic growth.

Revenue increased very strongly in the sauna heater product group, improving by 26.6 percent during the half-year period. In the sauna heater product group, Harvia’s solid development has been complemented with the robust sauna heater sales figures of EOS, which have been included for May and June. During the half-year period, the sauna room product group grew by 40.3 percent, with strongest growth in the United States and Central Europe. The demand for Almost Heaven Saunas remained high and their order book was strong. At the end of the review period, we made an investment decision to substantially increase AHS’s capacity in order to maintain our strong growth and high-quality customer service. According to the plan, the additional capacity will be fully operational at the end of 2020. Due to challenging situation in the Arab countries’, Asian and, in part, Russian markets, the sales of steam generators declined clearly from last year’s level.

Revenue growth was particularly strong in Finland, North America and Germany. Our strategy and actions to Increase the value of the average purchase and expanding our distribution in line with our strategy have supported sales growth well. Increased interest in home improvement and renovation projects in both the consumer and professional channel was clearly reflected in the favorable sales development in Finland, the other Nordic countries and Germany. The increase in total domestic sales was excellent, and our premium price category novelty, the Harvia Legend Greenflame with cleaner burning, was well received in the market. In the United States, demand for sauna heaters and components was strong and steady. Almost Heaven Saunas performed very well in the overall sauna market.

COVID-19 does not seem to have had a significant impact on the sauna and spa market as a whole. Although some of our key markets have been practically closed down, the interest and activity around the sauna and spa market in general have increased significantly. In certain markets, interest and activity have been on an exceptionally high level. We estimate, however, that some of this interest and demand is so-called advance demand, and in our view, there have been no significant changes in the long-term growth drivers or targets in the sauna and spa market.

Our business performance has also been favorable, and we were able to substantially improve our profitability in the first half-year. Our adjusted operating profit increased to EUR 9.8 million, representing an increase of 44.3 percent compared to the previous year. The adjusted operating profit for the second quarter amounted to EUR 5.6 million, increasing by 98.7 percent. Relative profitability developed favorably, with the operating profit margin for the half-year period standing at 21.3 percent and for the second quarter at 21.9 percent.

Our supply chain has been able to respond efficiently to the very volatile demand brought on by the COVID-19 pandemic, and we have been able to continuously improve our productivity while maintaining our customer service capabilities on a good level. Our personnel in all units have once again shown excellent commitment to maintaining their operational capability and health in an extremely professional way in the challenging COVID-19 environment.

The acquisition of the German EOS Group was completed at the end of April. The integration following the acquisition has proceeded with good team spirit, and all areas of the integration have been initiated as planned and are proceeding according to targets and in a timely manner.

The latest quarter was in many ways very exceptional for Harvia. Our entire personnel stretched to an outstanding performance in exceptional circumstances. Seamless cooperation and intensive communication with our key customers and key partners have enabled us to successfully implement our strategy together and, at the same time, respond to clearly increased changes in demand. Once again, I am happy to offer my humble thanks to the entire team for an excellent team performance. Thank you!

The sauna and spa market does not seem to be very sensitive to the impacts of COVID-19, and we are now shifting closer to the new normal in stages, one market at a time. We will continue our measures to promote and safeguard operational capabilities and health in all our activities, and we remain prepared for higher than normal fluctuation in demand continuing. We closely monitor the market together with our customers and partners in order to maintain the speed and agility of our operations in the future. Demand for our products is strong, but we estimate that a part of the sales is advance demand.

We will naturally keep our eye determinedly on the cornerstones of our strategy and will implement the strategy with focus on increasing the value of the average purchase, geographical expansion and continuous improvement of productivity. The integration following the EOS acquisition will continue according to plan with high priority. In addition to organic growth, we continue to actively explore opportunities to grow in the sauna and spa market through acquisitions.

Press conference

Harvia will hold a press conference in English for analysts, investors and media on Thursday, 13 August 2020 at 11:00 a.m. Finnish time. The press conference will be held at the Smart & Clean Showroom at Allas Sea Pool (address: Katajanokanlaituri 2a, Helsinki). CEO Tapio Pajuharju and CFO Ari Vesterinen will host the event.

A live webcast of the conference can be viewed at https://harvia.videosync.fi/2020-q2-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: 55761802#

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 74.1 million in 2019, and with EOS the pro-forma net sales of the group are estimated to exceed 90 million. The company employs more than 500 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