Harju Elekter Group financial results, 1-9/2018

Seotud dokumendid: 

AS Harju Elekter has focused on increasing sales and gaining market share in Scandinavia. 9-month sales revenue increased by 21%, but reaching the desired profitability requires additional time and expenses. The fulfilment of contractual orders in the third quarter was hampered by restrictions on electrical work related to fire risk in certain areas of Finland. Profitability was substantially affected by the potential loss in the third quarter of 1.5 million euros in connection with the additional costs of shipbuilding electrical works. The actual result will be clear at the end of negotiations and legal disputes.

 

Change

January - September

Change

July - September

Year

(thousand euros)

%

2018

2017

%

2018

2017

2017

Sales revenue

20.7

89,134

73,850

-6.2

29,298

31,228

102,668

Gross profit

0.5

11,108

11,055

-35.5

2,963

4,580

15,625

EBITDA

-31.4

3,300

5,241

-72.1

654

2,347

7,587

EBIT

-65.2

1,406

4,037

-99.5

9

1,915

5,442

Profit for the period

-95.9

1,158

28,186

-99.1

18

1,798

29,132

incl attributed to Owners of the Company

-95.8

1,190

28,153

-99.4

11

1,798

29,129

The Group's consolidated revenue for nine months reached to 89.1 (9M 2017: 73.8) million euros, of which 29.3 (Q3 2017: 31.2) million euros was earned in reporting quarter. The sales revenue decreased by 1.9 million euros in the reporting quarter but increased in 9-months period by 15.3 million euros compared to the reference periods. The boost in sales volumes was due to the increase in order volumes and the acquisition of new business combinations in the second half of 2017 and in January 2018.

During the reporting quarter 85.2% (Q3 2017: 80.0%) of the Group’s revenue was earned from the Manufacturing segment, Real Estate and Unallocated activities contributed 14.8% (Q3 2017: 20.0%) of the consolidated sales revenue. During 9-months period, the Manufacturing segment contributed 82.0% (9M 2017: 86.0%) of the consolidated sales revenue. Sales of electrical equipment contributed the biggest part (93-96%) of the Manufacturing segment’s revenue. The sales revenue of the Real Estate segment increased to 0.6 million euros in Q3 and to 1.8 million euros in nine months. The new production and storage buildings completed in the Allika industrial park in autumn 2017 and rented out to AS Stera Technologies AS and the Laohotell that was taken into use at the beginning of the current year have increased the rental income of this year.

The Group’s sales revenue earned outside Estonia accounted for 85.3% in Q3 2018 (Q3 2017: 88.7%), decreasing by 2.7 million to 25.0 million euros and in nine months 88.0% (9M 2017: 83.3%), increasing by 16.9 million to 78.5 million euros.

In Q3, sales to the Estonian market increased by 22.0% to 4.3 million euros and accounted for 14.7% of the consolidated sales revenue of the reporting quarter. Over the course of 9 months, the sale to Estonian market still dropped 13.3% due to the low investment level of the electrical distribution sector, i.e. 1.6 million euros, to 10.7 million euros and made 12.0% of the Group’s sales revenues. 

The Group's largest market is Finland, where 60.0% in Q3 2018 and 66.5% in 9-months period of the Group's products and services were sold (78.0% and 72.0%, respectively in 2017). In the quarterly comparison, sale to the Finnish market has decreased by 6.8 million euros to 17.6 million, half of which was caused of the decline in the orders of Finnish grid companies. Compared to nine months, Finland's sales increased up to 59.2 million euros i.e. by 6.1 million euros. Half of the growth came from the Finnish subsidiary Telesilta Oy, acquired in June 2017, but also large-scale contracts concluded with Finnish grid companies in the years 2016-2017 were behind the growth.

Comparing to the same periods last year, the sales to Swedish market has fivefold in Q3 2018 and increased to 3.4 million euros and have increased by 6.2 million euros to 8.4 million euros in 9-months period, accounting for 9.4% (9M 2017: 3.0%) of the total sales revenue. The growth came from acquisition new companies to the Group as well as Group’s subsidiaries purposeful work to increase market share in Sweden. In Q1, AS Harju Elekter Elektrotehnika signed a 3-year frame agreement with the biggest Swedish grid company E.ON Energidistribution AB, to deliver substations to Sweden. Deliveries of substations started in Q3. Altogether, 150 substations have been delivered to Sweden in nine months, being three times more than in the entire year 2017. Active work on Norwegian-direction continued also. The sales to the Norwegian market increased by 1.1 million euros up to 2.3 million euros in Q3 and in 9-months period by 2.1 million euros to 5.6 million euros, accounting for 7.9% and 6.3% of consolidated sales revenue, respectively.

From other markets, the biggest were the Netherlands, Austria and Denmark, where 1.7 million, 1.7 million and 0.8 million euros were earned during 9-months period, respectively.

In the reporting quarter, operating expenses amounted 29.3 million euros remaining on the same level with the comparable period and increased by 17.9 million euros to 87.7 million euros in 9-months period. The principal part of the cost increase, i.e. 15.2 million euros, is attributable to the greater cost of sales, outpacing the growth rate of sales revenues and reducing the 9-month gross profit margin in relation to the comparable period by 2.5 percentage points. The Group's distribution costs amounted 1.1 million euros in Q3 and 3.6 million euros in nine months. The rate of distribution costs accounted for 3.6% (Q3 2017: 3.1%) of the sales revenue in the reporting quarter and 4.1% (9M 2017: 3.8%) in 9-months period. Upsurge in specific orders has brought along an increase in development costs for upgrading the exiting products and for developing a new low-voltage product series and the brand. Recruitment of new specialists and qualifying of the staff resulted in training and new job preparation costs; the higher salary levels of the top managers of the subsidiaries in Sweden and Finland also affected the costs. All this has grown the rate of administrative expenses to reporting quarter revenue to 6.4% (Q3 2017: 5.3%). In nine months, administrative expenses amounted 6.0 million euros increasing by 1.8 million euros and the rate of administrative expenses to sales revenue was 6.7% (9M 2017: 5.6%). The labour costs of the reporting period have increased due to the bigger number of staff in the Group as well as the wage pressure. Moreover, the number of employees in Group’s subsidiaries in Finland and Sweden has also increased, with the wage level being significantly higher than in the Group’s other enterprises. Labour costs increased by 13.4% up to 5.8 million euros in Q3 and by 37.3% up to 18.0 million euros during 9-months period. The labour costs rate to revenue of the reporting quarter accounted for 19.9% (Q3 2017: 16.4%) and in the nine months it was 20.1% (9M 2017: 17.8%).

In Q3 2018, an average of 733 employees worked in the Group, which was 115 people more than in the comparable period. In nine months, an average of 709 employees worked in the Group, which was 159 people more than in the reference period. At the end of the reporting period, there were 728 people working in the Group, which was 104 persons more than a year earlier. From the beginning of the year, the number of employees increased by 98 people. With the acquisition of SEBAB AB and Grytek AB, 45 employees were added to the Group. In the reporting quarter, 4,766 (Q3 2017: 4,020) thousand euros and 14,046 (9M 2017: 9,945) thousand euros during the 9-months period were paid to the employees as salaries and fees. In the nine months, the average monthly salary per employee of the Group was 2,203 euros, an average increase of 193 euros compared to the reference period.

In the reporting quarter, the gross profit of the Group was 2,963 (Q3 2017: 4,580) thousand euros and the gross profit margin was 10.1% (Q3 2017: 14.7%). In 9-months period, the consolidated gross profit was 11,108 (9M 2017: 11,055) thousand euros and the gross profit margin was 12.5% (9M 2017: 15.0%). The decline in profitability was caused by amortisation of customer agreements recorded in 2017; the potential loss in the third quarter of 1.5 million euros in connection with the additional costs of shipbuilding electrical projects was taken into account also. The actual result will be clear at the end of negotiations and legal disputes.

In Q3, the Group’s operating profit was 9 (Q3 2017: 1,915) thousand euros and EBITDA 654 (Q3 2017: 2,347) thousand euros. In 9-months period, the Group’s operating profit was 1,406 (9M 2017: 4,037) thousand euros and EBITDA 3,300 (9M 2017: 5,241) thousand euros. Return of sales for nine months was 1.6% (9M 2017: 5.5%) and return of sales before depreciation 3.7% (9M 2017: 7.1%). Integrating newly acquired businesses has increased distribution and development costs. Preparations for new and already won procurements continue, leading to higher development costs, and due to hiring new specialists, increase labour costs. The profitability was also affected by one-off expenses due to the move of AS Harju Elekter Teletehnika into new premises and re-certification of subsidiaries' quality and environmental management systems.

In Q3, the consolidated net profit was 18 (Q3 2017: 1,798) thousand euros, of which the share of the owners of the Company was 11 (Q3 2017: 1,798) thousand euros. All in all, the consolidated net profit in nine months was 1,157 (Q3 2017: 28,186) thousand euros, of which the share of the owners of the Company was 1,190 (9M 2017: 28,153) thousand euros. In the nine months, EPS was 0.07 euros (9M 2017: 1.59 euros). In 9-months 2017, the consolidated net profit without extraordinary income (the result of one-time financial income from the sale of the PKC Group Oyj shares in amount of 24,839 thousand euros) was 3,314 thousand euros.

In 9 months 2018, the Group has made a total of 7.5 (9M 2017: 7.2) million euros worth of investments to fixed assets, incl. acquisitions through business combinations amounted to 1.0 (9M 2017: 1.7) million euros and the ongoing developments in Allika Industrial Park and in the construction of the Haapsalu solar plant in amount of 2.0 million euros.

In the end of the period, the share of Harju Elekter in Nasdaq Tallinn stood at the same, 5.00-euro level as at the beginning of the year.

Andres Allikmäe
Chairman of the Management Board
+372 674 7400

For more information: Tiit Atso, CFO, +372 674 7400 or Interim report 1-9/2018

AS HARJU ELEKTER        
CONSOLIDATED BALANCE SHEET,30.09.2018        
Unaudited        
         
         
EUR'000        
ASSETS                                                   30.09.18 31.12.17    
Cash and cash equivalents 1,868 10,992    
Short-term financial investments 5,414 9,935    
Trade receivables and other receivables 22,711 13,575    
Prepayments 1,299 1,118    
Prepaid income tax 274 56    
Inventories 18,974 13,037    
TOTAL CURRENT ASSETS                     50,540 48,713    
Deferred income tax asset 56 56    
Other long-term financial investments 4,696 4,684    
Investment property 18,938 17,881    
Property, plant and equipment 15,879 11,983    
Intangible assets 7,211 6,660    
TOTAL NON-CURRENT ASSETS 46,781 41,264    
TOTAL ASSETS                              97,321 89,977    
LIABILITIES AND OWNERS' EQUITY                   
Interest-bearing loans and borrowings 5,334 625    
Advances from customers 1,989 1,088    
Trade payables and other payables 15,943 12,802    
Tax liabilities   2,838 2,106    
Income tax liabilities 18 270    
Short-term provision 40 245    
TOTAL CURRENT LIABILITIES                 26,162 17,136    
Interest-bearing loans and borrowings 4,411 2,910    
Other long-term liabilities 35 0    
NON-CURRENT LIABILITIES             4,446 2,910    
TOTAL LIABILITIES                         30,608 20,046    
Share capital                             11,176 11,176    
Share premium 804 804    
Reserves 2,715 2,844    
Retained earnings                         52,040 55,048    
TOTAL OWNERS' EQUITY                       66,735 69,872    
Non-controlling interests -22 59    
TOTAL EQUITY                       66,713 69,931    
TOTAL LIABILITIES AND OWNERS' EQUITY      97,321 89,977    
         
         
CONSOLIDATED INCOME STATEMENT,  1-9/2018        
Unaudited        
         
EUR’000 Q3 2018 Q3 2017 9m 2018 9m 2017
         
Revenue 29,298 31,228 89,134 73,850
Cost of sales -26,335 -26,648 -78,026 -62,795
Gross profit 2,963 4,580 11,108 11,055
Distribution costs -1,052 -983 -3,644 -2,807
Administrative expenses -1,882 -1,658 -5,998 -4,162
Other income 17 9 60 39
Other expenses -37 -33 -120 -88
Operating profit 9 1,915 1,406 4,037
Finance income 171 120 523 24,966
Finance costs -15 -7 -38 -23
Profit for the period 165 2,028 1,891 28,980
Income tax expense -147 -230 -734 -794
Profit for the period, attributable to 18 1,798 1,158 28,186
   owners of the Company 11 1,798 1,190 28,153
   non-controlling interests 7 0 -33 33
Basic earnings per share  (EUR) 0.00 0.10 0.07 1.59
Diluted earnings per share  (EUR) 0.00 0.10 0.07 1.59

Tiit Atso
CFO
+372 674 7400