Harvia Plc, Interim report, 28 April 2020 at 9.00 a.m. EET
Harvia’s interim report 1 January – 31 March 2020
Profitable growth continued
This release is a summary of Harvia Plc’s Interim Report January–March 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
January–March 2020
Key figures
| EUR million | 1-3/2020 | 1-3/2019 | Change, % | 2019 |
| Revenue | 20.4 | 19.3 | 5.6% | 74.1 |
| EBITDA | 3.9 | 4.6 | -14.6% | 16.4 |
| % of revenue | 19.3% | 23.9% | 22.2% | |
| Items affecting comparability * | 1.1 | 0.1 | 766.2% | 0.6 |
| Adjusted EBITDA ** | 5.0 | 4.7 | 6.2% | 17.0 |
| % of revenue | 24.7% | 24.5% | 22.9% | |
| Operating profit | 3.1 | 3.8 | -19.2% | 13.3 |
| % of revenue | 15.3% | 19.9% | 18.0% | |
| Adjusted operating profit ** | 4.2 | 4.0 | 5.8% | 13.9 |
| % of revenue | 20.6% | 20.6% | 18.7% | |
| Basic EPS (EUR) | 0.13 | 0.14 | -8.7% | 0.51 |
| Operating free cash flow | 5.9 | 1.7 | 243.9% | 15.2 |
| Cash conversion | 117.4% | 36.3% | 89.3% | |
| Investments in tangible and intangible assets | -0.3 | -0.5 | -33.9% | -1.8 |
| Net debt | 24.3 | 31.6 | -23.1% | 28.3 |
| Leverage | 1.4 | 2.3 | 1.7 | |
| Net working capital | 15.2 | 20.2 | -24.4% | 16.8 |
| Adjusted return on capital employed (ROCE) | 37.7% | 30.9% | 38.2% | |
| Equity ratio | 57.1% | 55.7% | 56.6% | |
| Number of employees at end of period | 399 | 390 | 2.3% | 395 |
* Consists of items outside the ordinary course of business that are related to Group's strategic development projects, acquisitions, restructuring expenses 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 long-term 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.
Tapio Pajuharju, CEO:
Harvia’s first quarter of 2020 was fairly strong despite the challenges imposed by the coronavirus pandemic that hit Finland in March. Revenue growth exceeded our 5 percent growth target and the adjusted operating profit increased by 5.8 percent to EUR 4.2 million. Relative profitability remained on a very good level and the adjusted operating margin was 20.6 percent. Our cash flow also developed very favorably.
Revenue growth was especially strong in Scandinavian countries, North America and Germany. Working on the cornerstones of our strategy, i.e. increasing the value of the average purchase and expanding our distribution has resulted in strong growth especially in Scandinavia and in the United States. The total volume of domestic sales was rather stable; the sauna heater sales were strong, but we were not able to increase our share in the sauna room category. The situation in Central Europe varies by market. We are extremely satisfied with the development in Germany. At the same time, however, the coronavirus pandemic has taken a toll on Italy, Spain, France and the Benelux countries. The Russian market was affected by the significant decline in the Russian ruble, which was reflected on the purchasing power of import products, as well as the lockdown caused by the coronavirus at the end of March. This temporarily halted the operations of some local authorities and complicated import process. The coronavirus situation and uncertainty in the Arab countries was also reflected on Harvia’s sales.
Revenue growth was extremely good in the sauna room category with a solid 34.2 percent growth. Revenue in sauna heaters developed steadily, as well. The sales of steam generators and control units was impacted by the market situation in the Arab countries, Asia and Russia. Demand in the US market remained on a very good level both in the Almost Heaven Saunas (AHS) sauna rooms and in Harvia’s sauna heaters and components.
The third cornerstone of our strategy, improving the efficiency of productivity, was unfortunately somewhat set aside by our very strong and professional preparations for the coronavirus pandemic and voluntary quarantines. Nonetheless, productivity remained on an excellent level, even though we were not able to make significant improvements during the first quarter. Thanks to the excellent cooperation and commitment of our personnel, Harvia has maintained almost full operational capability during the coronavirus outbreak.
The acquisition of the majority share of the German EOS Group, a technology leader in professional and premium sauna & spa products, has been a significant strategic step for Harvia. Together we are stronger and will become the global leader in the professional and premium products category. The acquisition will further strengthen our position especially in Central Europe and will open up new possibilities in the US and Asia. The transaction is set to be completed at the end of April, after which we can initiate the integration process as planned.
Due to the coronavirus, we have invested heavily in health and safety with good results. At the beginning of the year, our factory in China began its operations very quickly and has been able to operate at full capacity. The special measures taken at the Harvia units slightly slowed down the normal rate of productivity. Despite of the incremental coronavirus-related arrangements, we have been able to deliver customer orders to the full or with very minimal delays. We are very happy that most of our suppliers and partners have been able to operate almost as usual, and there has been only a temporary shortage of componentry. Our personnel are more than aware of the severity of the situation and have demonstrated an exceptional and entrepreneurial attitude in the challenging situation, all of this without compromising safety. This has allowed us to help and support our customers and partners to survive this difficult situation. The entire Harvia team has done an outstanding job – I would like to pass my humble thanks for the great effort. Thank you!
No company, market or phenomenon is immune to the coronavirus. Due to the relatively large share of the replacement business, it seems that the sauna and spa market is not overly sensitive to the pandemic. At the moment, most of our key customers are gradually returning to the new normal, and the demand in the sauna and spa market has remained mostly on a good level despite the outbreak. We remain humble but keep our determined focus on the cornerstones of our strategy and its implementation by focusing on increasing the value of the average purchase, geographical expansion and continuous improvement of productivity. At the same time, we continue to very closely monitor the market and its changing dynamics in order to be able to take action in a quick and agile manner, if needed. In addition to organic growth, we are actively looking into suitable opportunities to grow in the sauna and spa market through business acquisitions.
Press conference
Harvia will hold a webcast conference in English for analysts, investors and media on Tuesday, 28 April 2020 at 11:00 a.m. Finnish time. CEO Tapio Pajuharju and CFO Ari Vesterinen will host the event. The webcast will be available at https://harvia.videosync.fi/2020-q1-results.
A recording of the webcast will be available on Harvia’s website https://harviagroup.com/ after the event.
You can also participate in the conference by telephone:
Finland: +358981710310
Sweden: +46 856642651
UK: +44 3333000804
US: +1 6319131422
PIN 47829199#
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, its operating profit was EUR 13.3 million and adjusted operating profit EUR 13.9 million during the same period. The company employs some 400 professionals in Finland, China and Hong Kong, Romania, Austria, United States, Germany and Estonia. The company is headquartered in Muurame, Finland, adjacent to its largest sauna and sauna component manufacturing facility.
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