Harvia’s Interim Report 1 January – 31 March 2022

Stock Exchange Release | 5 May 2022

Harvia Plc, Interim report 5 May 2022 at 9.00 a.m. EET

Harvia Q1: Strong revenue growth and solid profitability driven by sauna room sales

This release is a summary of Harvia Plc’s Interim Report January–March 2022. 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 2022:

  • Revenue increased by 28.2% to EUR 50.8 million (39.6). At comparable exchange rates, revenue increased by 26.3% to EUR 50.0 million. On top of strong organic revenue growth of 18.1%, Harvia enjoyed revenue growth due to acquisitions.
  • The share of international business was EUR 39.1 million (31.4), making up 77.0% (79.2) of the revenue.
  • Operating profit was EUR 12.1 million (11.0), making up 23.8% (27.9) of the revenue.
  • Adjusted operating profit increased to EUR 12.1 million (11.1), making up 23.8% (28.1) of the revenue. At comparable exchange rates, the adjusted operating profit increased to EUR 11.7 million (23.4% of the revenue).
  • Operating free cash flow amounted to EUR 7.0 million (8.1) and cash conversion was 51.0% (66.0). The change in net working capital decreased the operating free cash flow and cash conversion.
  • Net debt amounted to EUR 41.3 million (26.9) and leverage was 0.8 (0.7).
  • Equity ratio was 43.7% (44.2).
  • Earnings per share was EUR 0.50 (0.44).

Key figures

EUR million 1-3/2022 1-3/2021 Change, % 1-12/2021
Revenue 50.8 39.6 28.2% 179.1
EBITDA 13.7 12.3 11.7% 52.5
% of revenue 27.0% 31.0%   29.3%
Items affecting comparability * 0.0 0.1 -95.2% 0.6
Adjusted EBITDA ** 13.7 12.3 11.0% 53.1
% of revenue 27.0% 31.1%   29.7%
Operating profit 12.1 11.0 9.4% 46.6
% of revenue 23.8% 27.9%   26.0%
Adjusted operating profit ** 12.1 11.1 8.7% 47.3
% of revenue 23.8% 28.1%   26.4%
Basic EPS (EUR) 0.50 0.44 13.0% 1.80
Operating free cash flow 7.0 8.1 -14.3% 20.4
Cash conversion 51.0% 66.0%   38.5%
Investments in tangible and intangible assets -0.9 -1.5 -35.1% -11.8
Net debt 41.3 26.9 53.9% 43.8
Leverage 0.8 0.7   0.8
Net working capital 47.8 21.0 127.9% 41.9
Adjusted return on capital employed (ROCE) 102.8% 91.0%   112.6%
Equity ratio 43.7% 44.2%   42.4%
Number of employees at end of period 834*** 686 21.6% 824***

* 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 and Sauna-Eurox, totaling 69 employees on 31 March 2022.

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’s dividend policy is to pay a regularly increasing dividend with a bi-annual payout.

Tapio Pajuharju, CEO:

Historically, the first quarter is good in the sauna and spa industry. This was true for 2022 as well, as we reached an all-time high quarterly revenue with solid profitability. Once again, the outcome is excellent, and I would like to pass my sincere thanks to everyone involved. 

Despite the somewhat more challenging environment, we have been successful in the market and generated very solid topline growth during the first quarter of 2022, growing 28.2%, or EUR 11.2 million, from the previous year. Our grip on the market is strong, and we have continued to gain market share and further strengthened our position.

The sales performance was very strong in Finland, in the market area of other countries, other European countries and North America in the first quarter. In Finland, we have been successful in the preseason sales and our US sauna and heater offering is in very good shape. After a strong start, the sales in Russia declined sharply as we halted the business operations at the beginning of March. In Central Europe and Germany, the growth rate slowed from the previous year, as there was some softness, especially in entry level offering to local webstores.  

This was also reflected in the sales of heater category, which landed only slightly ahead of the previous year. Sauna rooms continued to perform very well and resulted in a strong and healthy growth for the period. Steam generators stayed also nicely on a growth path.

The first quarter’s operating profit was EUR 12.1 million, an improvement of EUR 1.0 million compared to the previous year. The change in sales mix with more weight on saunas together with the increasing cost level took the relative profitability in terms of adjusted EBIT down to 23.8% of revenue (28.1). Due to the increased supply chain volatility, we continued to grow our buffer stocks of critical components and raw materials. This further increased our net working capital and had an impact on our cash conversion.

During the past year, we have been learning how to operate in a very volatile and high inflation supply environment. Despite this experience, the first quarter did bring some new parameters which none of us was able to foresee nor plan for. In addition to the war in Ukraine, the price hikes and availability issues in very basic raw materials like steel and lumber reached extraordinary levels. Our good preparations and hefty buffer stocks enabled us to keep our customer service level as close to normal as possible. While we are rather well-off in terms of most raw materials and components, the availability and prices of certain grades of steel and lumber is a concern.

Full attention has been given to the situation of availability issues and increasing raw material and component prices. The high volatility as well as the scale and scope of the situation has made it almost impossible to mitigate it in full. We have addressed this, and the full effect of our actions will be transferred to our prices with some delay. For Harvia, suspending business in Russia has caused a clear gap in our original business plans. We intend to mitigate this with increased efforts in other markets and deepening the distribution in our core markets. The demand seems to be normal, but we are monitoring the development of consumer confidence extremely closely, and we have increased our sense of urgency and agility. Our actions on growing the market and gradually increasing profitability remain fully intact. Our innovation pipeline is strong, and our new market launches are promising.

On top of this, we will continue to be 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&As in the sauna and spa market remain active. 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 5 May 2022 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/results-q1-2022

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: 15901936#

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 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 179.1 million in 2021, of which 79% came from outside Finland. 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