Harvia’s half-year financial review 1 January – 30 June 2021

Stock Exchange Release | 12 August 2021

Harvia Plc, Half-year financial review 12 August 2021 at 9.00 a.m. EET

Strong demand and high volumes resulted in excellent profitability

This release is a summary of Harvia Plc’s Half-year financial review January–June 2021. 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 2021:

  • Revenue increased by 83.4% to EUR 46.8 million (25.5). At comparable exchange rates, revenue increased by 88.4% to EUR 48.1 million. The impact of acquisitions on growth was substantial, but organic revenue growth was also strong at 60.0%.
  • Adjusted operating profit increased to EUR 13.2 million (5.4), making up 28.3% (21.1) of the revenue. At comparable exchange rates, the adjusted operating profit increased to EUR 13.7 million (28.4% of the revenue).
  • Operating profit was EUR 12.9 million (4.6), making up 27.5% (17.9) of the revenue.
  • Operating free cash flow amounted to EUR 4.0 million (4.5) and cash conversion was 27.6% (70.8%). Capacity investments and increase of net working capital decreased the operating free cash flow and cash conversion in the second quarter.
  • On 28 May 2021, Harvia signed and closed an agreement to acquire Kirami, a leading Finnish still water hot tub manufacturer and pioneer in wood-heated hot tubs globally. The financial figures of Kirami have been consolidated with Harvia’s figures starting from 28 May 2021.

January–June 2021:

  • Revenue increased by 88.4% to EUR 86.5 million (45.9). At comparable exchange rates, revenue increased by 93.9% to EUR 88.9 million. The impact of acquisitions on growth was substantial, but organic revenue growth was also strong at 60.8%. The financial figures of EOS have been consolidated from 1 May 2020, hence Harvia’s January–April 2021 figures contained inorganic growth.
  • Adjusted operating profit increased to EUR 24.4 million (9.6), making up 28.2% (20.9) of the revenue. At comparable exchange rates, the adjusted operating profit increased to EUR 25.3 million (28.5% of the revenue).
  • Operating profit was EUR 23.9 million (7.7), making up 27.7% (16.7) of the revenue.
  • Operating free cash flow amounted to EUR 12.2 million (10.4).
  • Net debt amounted to EUR 38.4 million (43.6) and leverage was 0.9 (2.2).
  • Equity ratio was 39.3% (41.3).
  • Harvia has taken special measures in all 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 million4-6/
EBITDA 14.35.6154.1%26.69.6178.0%26.7
% of revenue30.5%22.0% 30.7%20.8 % 24.5%
Items affecting comparability *0.30.8-58.0%0.41.9-78.3%2.1
Adjusted EBITDA **14.66.4127.5%27.011.5135.5%28.8
% of revenue31.2%25.2 % 31.2%24.9% 26.4%
Operating profit12.94.6182.0%23.97.7211.7%22.4
% of revenue27.5%17.9% 27.7%16.7% 20.5%
Adjusted operating profit **13.25.4146.0%24.49.6154.2%24.4
% of revenue28.3%21.1% 28.2%20.9% 22.4%
Basic EPS (EUR)0.490.17182.2%0.930.30209.6%0.83
Operating free cash flow 4.04.5-11.3%12.210.416.6%28.7
Cash conversion27.6%70.8% 45.2%91.2% 99.7%
Investments in tangible and intangible assets-4.1-0.4981.5%-5.5-0.7715.8%-2.6
Net debt 38.443.6-11.8%38.443.6-11.8%31.9
Leverage0.92.2 0.92.2 1.1
Net working capital 29.522.332.3%29.522.332.3%18.0
Adjusted return on capital employed (ROCE)103.4%43.4% 103.4%43.4% 73.3%
Equity ratio39.3%41.3% 39.3%41.3% 42.0%
Number of employees at end of period 822***56346.0%822***56346.0%617

* 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 Kirami, totaling 83 employees on 30 June 2021.

Financial targets and outlook

Harvia targets an average annual revenue growth of more than 5%, an adjusted operating profit margin exceeding 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.

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.

Harvia does not publish a short-term outlook.

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

Tapio Pajuharju, CEO:

After a robust first quarter of 2021, Harvia enjoyed an exceptionally strong demand also during the second quarter. Demand has been strong in all key markets, and despite the challenges concerning the availability of key raw materials and componentry, we have been able to supply the needed products with only minor delays. The Q2 net sales landed at record-high EUR 46.8 million and 83% growth year on year. The impact of acquired business was substantial, but organic growth was also good and amounted to 60%.

We are more than pleased that the high demand combined with our strong operational performance and high volumes resulted in an exceptionally high adjusted operating profit of EUR 13.2 million and 28.3% of the revenue in Q2.

Once again, excellent work and effort from everyone at team Harvia and at our partners. I extend my special and humble thanks to everyone. Great teamwork!

Our successful marketing efforts and operational execution together with the underlying solid demand delivered robust growth in all key markets and product categories. The volatility of the Russian market continues, but even there our new distribution solution generated a somewhat favorable outcome. Regarding the performance of our portfolio, we experienced solid growth in all categories, but especially strong growth in control units and sauna rooms. The previous softness in steam generators is gradually turning into business as usual. The capacity in sauna rooms was a limiting factor and this has resulted in a stronger than normal order book, especially in Europe.

The awareness and popularity of sauna has increased during the pandemic, further boosting the underlying solid demand in the sauna and spa category. With the same token, Harvia’s management continues to estimate that part of this growth is generated by so-called advance demand and thus, it is not expected to affect the long-term growth expectations of the sauna and spa market.

The recently acquired Scandinavian still water hot tub manufacturer Kirami has been performing well. The integration is progressing at full speed and in good spirit.

Even though we already consider EOS to be an integral part of the Harvia family, it is worth mentioning that the premium and professional EOS offering has continued a very solid and favorable performance.

Like in any other business, our supply chain has been affected by the global phenomenon of increased prices and exceptional volatility in the availability of raw materials and key componentry. Thanks to our long-term partners and multiple sourcing strategy, we have been able to keep the impact modest and under control. Going forward, we anticipate the same challenging situation to continue at least for the rest of the year. Based on this, we have taken proactive measures in sourcing, increasing buffer stocks of critical raw materials and componentry, as well as developing alternative solutions for the bill of materials.

We have been able to increase our operational capacity by adding personnel and extending shifts. Staff onboarding has been very successful, and we have been able to maintain Harvia’s normal good productivity. On top of this we have been completing the current investments in Romania. The development of the new Almost Heaven Saunas plant in the United States is progressing according to plan and the factory expansion in Muurame is well on schedule. With the current market demand and our operating capacity we foresee that our capital expenditure in 2021 will exceed the anticipated range of EUR 5–8 million and with the latest projects at hand, we estimate that the full year 2021 capital expenditure will land at approximately EUR 10 million. Harvia cash conversion has remained good, but during this quarter it has been impacted by the increased networking capital and the capital expenditure.

During the H2 of 2021, we will remain fully focused on the cornerstones of our strategy by working on increasing the value of the average purchase, geographical expansion, and continuous improvement of productivity. M&A activity in the sauna and spa market has increased in line with the year 2020. In line with our strategy, we continue to seek opportunities to grow in the sauna and spa market also through M&A.

Press conference on financial results

Harvia will hold a webcast for analysts, investors, and media on 12 August 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/2021-q2-results.

You can also participate in the conference by calling:

Finland: +358 981 710 310
Sweden: +46 856 642 651
UK: +44 333 300 0804
US: +1 631 913 1422

PIN: 46246229#

A recording of the webcast will be available later at the company’s website https://harviagroup.com/investor-relations/.

For more information, please contact:

Tapio Pajuharju, CEO, tel. +358 50 5774 200
Ari Vesterinen, CFO, tel. +358 40 5050 440

Harvia in short

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 800 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/