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Harvia Plc, Interim report, 7 May 2019 at 9.00 a.m. EET
Profitable growth in the first quarter
This release is a summary of Harvia Plc's Interim Report January–March 2019. 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
- Revenue grew by 16.9% to EUR 19.3 million (16.5). At comparable exchange rates, revenue grew by 16.6% to EUR 19.2 million. Organic revenue growth was 7.5%.
- Adjusted operating profit was EUR 4.0 million (3.2), making up 20.6% (19.5) of the revenue. At comparable exchange rates, the adjusted operating profit grew by 20.4% to EUR 3.9 million (20.1% of the revenue).
- Operating free cash flow amounted to EUR 1.7 million (2.0).
- Net debt amounted to EUR 31.6 million (29.8) and leverage was 2.3 (2.4).
- Equity ratio increased to 55.7% (53.4).
EUR million 1-3/2019 1-3/2018 Change, % 2018
Revenue 19.3 16.5 16.9 % 61.9
EBITDA * 4.6 2.4 89.9 % 11.5
% of revenue 23.9 % 14.7 % 18.6 %
Items affecting comparability ** 0.1 1.3 -90.2 % 1.5
Adjusted EBITDA *** 4.7 3.7 27.6 % 13.0
% of revenue 24.5 % 22.5 % 21.0 %
Operating profit 3.8 1.9 99.1 % 9.4
% of revenue 19.9 % 11.7 % 15.1 %
Adjusted operating profit *** 4.0 3.2 23.5 % 10.9
% of revenue 20.6 % 19.5 % 17.5 %
Basic EPS (EUR) **** 0.14 0.16 -11.0 % 0.41
Operating free cash flow 1.7 2.0 -13.8 % 10.0
Cash conversion 36.3 % 53.6 % 77.0 %
Investments in tangible and intangible assets -0.5 -0.6 -21.7 % -1.6
Net debt * 31.6 29.8 5.9 % 30.3
Leverage 2.3 2.4 2.3
Net working capital 20.2 18.2 10.9 % 17.5
Adjusted return on capital employed (ROCE) 30.9 % 31.7 % 31.6 %
Equity ratio 55.7 % 53.4 % 56.3 %
Number of employees at end of period 390 370 5.4 % 400
* Adoption of IFRS 16 Leases standard increased EBITDA by EUR 149 thousand and net debt by EUR 2.9 million at the end of March 2019.
** 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 asset and affect comparability.
*** Adjusted by items affecting comparability.
**** Earnings per share (EPS) in January–March 2018 were EUR 0.09, calculated based on the number of shares after the listing.
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:
During the first quarter of 2019, the demand for sauna and spa products remained steady, and thanks to the systematic implementation of our strategy, we were able to improve our competitiveness. In the sauna and spa market, the first quarter of the year is important and now we faced comparison figures from Harvia's all-time record quarter in 2018. Revenue for the first quarter increased significantly (16.9%) year on year and amounted to EUR 19.3 million. Organic revenue growth was at a good level (7.5%). Part of our growth is attributable to the acquisition of the business operations of Almost Heaven Saunas (AHS) in the United States at the end of 2018.
Our revenue increased especially in the sauna heater market, with strong growth in electric heaters and particularly in wood-burning heaters. Our new and innovative products had a favorable impact on sales development. Our electric sauna heaters Glow, Cilindro Plus, and The Wall as well as the SENTIO by Harvia products have been well received in the market. In the wood-burning heater product group, one of our largest products, Harvia Pro 20, received its long-awaited update, and we began delivering the renewed version to customers in March. We achieved significant growth also in the sauna room product group, largely thanks to the AHS acquisition.
Demand was good and Harvia's operations were successful in most of our key markets. Nevertheless, the decrease in demand in the German market that we faced at year end 2018 did not recover in the first quarter of the year. This was reflected in the deliveries of electric heaters and particularly control units.
The profitability of our business remained stable and strong. Harvia's profitability improved significantly year on year, and the Group's adjusted operating profit grew to EUR 4.0 million (3.2). Our increased sales volumes, attractive product range and continuous improvement of productivity had a positive impact on our profitability. Our adjusted operating profit margin was 20.6%, showing a clear improvement from the comparison period (19.5%). We continued our investments in improving productivity and we completed investments in new advanced machinery during the first quarter.
Taking over the operations of the US-based Almost Heaven Saunas, acquired at the end of 2018, has proceeded as planned. Among other things, we have renewed AHS's product range and pricing as well as improved the terms and conditions of purchases. Our revenue in North America increased significantly thanks to the acquisition of Almost Heaven Saunas. Additionally, growth among other customers in North America was exceptionally strong.
Our first quarter of the year was strong, and both Harvia's team and our key customers have done a very good job. We continue to implement our strategy with determination and focus on increasing the value of the average purchase, geographical expansion as well as the continuing improvement of productivity. In addition to organic growth, Harvia is actively looking into possibilities of growth through business acquisitions.
Harvia will hold a press conference in English for analysts, investors and media today, Tuesday May 7 2019 at 11:00 a.m. Finnish time. The press conference is held in the Wintti conference room at Klaus K (address: Bulevardi 2-4, Helsinki). CEO Tapio Pajuharju and CFO Ari Vesterinen will host the event.
A live webcast of the conference is available at: https://harvia.videosync.fi/2019-q1-results .
You can also participate in the conference by telephone:
FI: +358 981 710 310
SE: +46 8 5664 2651
UK: +44 333 300 08 04
US: +1 631 913 14 22
For further information, please contact:
CEO Tapio Pajuharju, , tel. +358 50 577 4200
CFO Ari Vesterinen, , 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 61.9 million in 2018, its operating profit was EUR 9.4 million and adjusted operating profit EUR 10.9 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.
Read more www.harvia.fi
Harvia Plc_Interim report_January-March_2019