Harvia Plc, Interim report, 14 November 2018 at 9.00 a.m. EET
Steady development continued in the third quarterThis release is a summary of Harvia Plc's Interim Report January-September 2018. The complete report is attached to this release as a pdf-file. It is also available on Harvia's website at www.harvia.fi.
Highlights of the review period
July-September 2018
January-September 2018
Key figures
| EUR million | 7-9/2018 | 7-9/2017 | Change | 1-9/2018 | 1-9/2017 | Change | 2017 |
| Revenue | 14.0 | 13.2 | 6.1% | 45.7 | 44.0 | 4.0 % | 60.1 |
| EBITDA | 2.8 | 2.8 | 1.9 % | 8.2 | 9.0 | -8.3 % | 11.2 |
| % of revenue | 20.3 % | 21.1 % | 18.0 % | 20.4 % | 18.6 % | ||
| Items affecting comparability * | 0.1 | 0.0 | 32.3 % | 1.4 | 0.3 | 311.3 % | 1.4 |
| Adjusted EBITDA ** | 2.9 | 2.8 | 2.4 % | 9.6 | 9.3 | 3.2 % | 12.6 |
| % of revenue | 20.7 % | 21.4 % | 21.0 % | 21.1 % | 21.0 % | ||
| Operating profit | 2.3 | 2.3 | -0.6 % | 6.6 | 7.5 | -11.9 % | 9.3 |
| % of revenue | 16.4 % | 17.5 % | 14.5 % | 17.1 % | 15.4 % | ||
| Adjusted operating profit ** | 2.3 | 2.3 | 0.0 % | 8.0 | 7.9 | 1.8 % | 10.7 |
| % of revenue | 16.7 % | 17.8 % | 17.5 % | 17.9 % | 17.8 % | ||
| Basic EPS (EUR) | 0.09 | 0.08 | 3.1 % | 0.30 | 0.30 | 0.3 % | 0.30 |
| Operating free cash flow | 2.6 | 2.1 | 25.5 % | 5.0 | 4.1 | 22.2 % | 9.0 |
| Cash conversion | 90.4 % | 73.7 % | 51.6 % | 43.6 % | 71.6 % | ||
| Investments in tangible and intangible assets | -0.4 | -0.3 | 16.9 % | -1.2 | -0.8 | 45.9 % | -1.2 |
| Net debt | 29.7 | 72.4 | -59.0 % | 29.7 | 72.4 | -59.0 % | 73.0 |
| Leverage | 2.3 | 5.9 | 2.3 | 5.9 | 5.8 | ||
| Net working capital | 20.8 | 16.8 | 24.1 % | 20.8 | 16.8 | 24.1 % | 17.3 |
| Adjusted return on capital employed (ROCE) | 30.9 % | 35.0 % | 30.9 % | 35.0 % | 32.7 % | ||
| Equity ratio | 57.5 % | 17.0 % | 57.5 % | 17.0 % | 16.9 % | ||
| Number of employees at end of period | 376 | 367 | 2.5 % | 376 | 367 | 2.5 % | 365 |
| * Consists of items outside the ordinary course of business that are related to Group's strategic development projects, the listing, acquisitions and loss on sale of fixed assets and affect comparability. | |||||||
| ** Adjusted by items affecting comparability. | |||||||
Financial targets and outlook
Harvia does not publish its short-term outlook. However, the company has set targets related to growth, profitability and leverage. 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. Based on the authorisation given by the Annual General Meeting 2018, the Board of Directors of Harvia Plc resolved on 10 October 2018 that a dividend of EUR 0.18 per share, totalling EUR 3.4 million, be distributed from retained earnings. The dividend was paid on 19 October 2018.
Tapio Pajuharju, CEO:
The exceptionally hot summer created challenges for the demand of sauna and spa products in all our key markets. Despite that and unfavourable exchange rates, our sales efforts were very successful and Harvia's revenue developed positively during the third quarter. In Finland, Scandinavia, Russia and other markets, our growth clearly exceeded market growth, and all in all we increased our revenue by 6.1 per cent.
During the review period, we reached a revenue of EUR 45.7 million, representing a 4.0 per cent growth year on year. Our revenue increased particularly in Finland although the wood burning heater market did not quite reach the expected normal level due to the hot summer. In Scandinavia and Russia, the more focused offering and new products increased heater and component sales. The discontinuation of two private label accounts is still reflected in Germany and in the sales of control units.
Despite the challenges created by the hot summer and unfavourable exchange rates, the adjusted EBITDA reached the level of EUR 2.9 million (2.8) in the third quarter. The adjusted operating profit remained at the same level as in the comparison period at EUR 2.3 million, or 16.7 (17.8) per cent of the revenue. The operating profit margin was impacted by the increase in sauna sales, the product mix and exchange rates. Investments in new products and other investments increased depreciations in the review period compared to the previous year. The adjusted operating profit for January-September was EUR 8.0 million, or 17.5 per cent of the revenue. Cash flow remained steady.
The SENTIO by Harvia core offering was launched in Finland at the Habitare fair, and the products will be available later during the year for our professional customers. The Wall product family is expanding as planned, and we have finalised The Wall combination heater with a steamer as well as high output models which will be launched later this year. The popular Harvia Cilindro pillar heater was complemented with the impressive-looking Cilindro plus model, which features illuminated and childproof controls and will be launched in our key markets during late 2018.
The implementation of the "one-stop shop" strategy in the sauna and spa business proceeded as planned. The geographic expansion proceeded according to plans during the review period. In Scandinavia, distribution and range of models have developed favourably in Sweden. The recruitment of the Scandinavian sales manager and a member of the management team was completed, and we will strengthen our sales force in November to support profitable growth in Scandinavia. Distribution in the EU market has been strengthened as planned, and we are more than ready for the coming sauna season. In Russia, we have expanded geographically as well as improved our distribution and product range in Moscow and St. Petersburg. Harvia's comprehensive sauna and spa range, including new products, is strongly represented during the remainder of the year in significant industry events, such as Interbad in Stuttgart and the Piscine fair in Lyon.
All in all, we are well prepared for the coming autumn sauna season and will continue the systematic implementation of our strategy, with a focus on increasing the value of the average purchase, geographical expansion and improving our productivity.
Press conference
Harvia will hold a press conference in English for analysts, investors and media today, Wednesday 14 November 2018 at 11:00 a.m. Finnish time. The press conference is held in the Eino Leino cabinet of Hotel Kämp (address: Pohjoisesplanadi 29, Helsinki).
A live webcast of the conference is available at: https://harvia.videosync.fi/2018-q3-results.
You can also participate in the conference by telephone:
Finland: +358 800 523 163
Sweden: +46 856 642 651
UK: +44 333 300 0804
US: +1 631 913 1422
Questions to the presenters can be made at the end of the press conference. The webcast is recorded and will be made available on Harvia's website.
HARVIA PLC
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.[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, 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.
[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 Finnish, Swedish, German, Russian and American consumers (altogether 810 consumers) conducted by an international management consultant company in autumn 2017 and commissioned by Harvia.
