Purmo Group Plc | Stock Exchange Release | February 13, 2024 at 08:15:00 EET
October-December 2023
- Net sales decreased by 15 per cent to EUR 175.0 million (206.6). The organic¹ decline in net sales was 14 per cent.
- Net sales for the Climate Product & Systems division decreased by 17 per cent to EUR 134.9 million (162.7) and net sales for the Climate Solutions division decreased by 9 per cent to EUR 40.1 million (44.0).
- Adjusted EBITDA increased by 30 per cent to EUR 21.1 million (16.3).
- Adjusted EBITDA margin improved significantly to 12.1 per cent (7.9) supported by strong margin management and good performance in the Accelerate PG programme.
- EBIT was EUR -25.5 million (-1.5), which was burdened by EUR 39.0 million (9.7) of comparability adjustments mainly related to the closure of the production plant in Zonhoven, Belgium as part of the Accelerate PG programme.
- Cash flow from operating activities decreased to EUR 32.5 million (40.2), mainly due to change in net working capital.
- Accelerate PG programme's adjusted EBITDA run-rate improvements amounted to EUR 30.1 million (EUR 22.4 million at the end of Q3 2023), of which periodic impact for the fourth quarter was EUR 6.4 million.
January-December 2023
- Net sales decreased by 18 per cent to EUR 743.2 million (904.1). The organic¹ decline in net sales was 17 per cent.
- Net sales for the Climate Product & Systems division decreased by 18 per cent to EUR 591.9 million (720.6) and net sales for the Climate Solutions division decreased by 18 per cent to EUR 151.6 million (183.9).
- Adjusted EBITDA was EUR 92.3 million and at a similar level compared to the previous year (92.9).
- Adjusted EBITDA margin improved significantly and was 12.4 per cent (10.3).
- EBIT was EUR 9.7 million (39.0), which was burdened by EUR 52.8 million (21.7) of comparability adjustments mainly related to the Accelerate PG programme.
- Cash flow from operating activities improved to EUR 40.4 million (31.3), mainly due to change in net working capital.
- Adjusted operating cash flow (last 12 months) improved by 68 per cent to EUR 75.1 million (44.0).
- Proposed return of capital for 2023 is EUR 0.36 per class C share and EUR 0.07 per class F share.
¹ Excluding currency effects and impacts from acquisitions and divestments.
Financial guidance 2024
Adjusted EBITDA in 2024 is expected to be on a similar or higher level than in 2023 (EUR 92.3 million).
Wholesalers' stock levels have stabilised, and the lower interest rates support the expectations of a gradual
market activity improvement. Strong margin management actions, which will continue in 2024, provide confidence in the guidance for the Group. However, increased geopolitical risks and high overall uncertainties can have an impact on Purmo Group's core markets.
The strategy acceleration programme, Accelerate PG, performs ahead of plan and further underpins Purmo
Group's outlook for 2024. As a result, the company updates the programme's target. The cumulative targeted adjusted EBITDA run-rate improvements will be EUR 50 million (previously: above EUR 40 million), which are expected to be reached by the end of 2024. The programme also targets cumulative net working capital improvements of EUR 45 million by the end of 2024 (previously: more than EUR 30 million).
Key figures
| EUR million | 10-12/2023 | 10-12/2022 | Change,% | 2023 | 2022 | Change,% |
| Net sales | 175.0 | 206.6 | -15% | 743.2 | 904.1 | -18% |
| Adjusted EBITDA¹ | 21.1 | 16.3 | 30% | 92.3 | 92.9 | -1% |
| Adjusted EBITDA margin, %¹ | 12.1% | 7.9% | 12.4% | 10.3% | ||
| Adjusted EBITA¹ | 14.4 | 9.2 | 57% | 66.3 | 64.6 | 3% |
| Adjusted EBITA margin, %¹ | 8.3% | 4.4% | 8.9% | 7.1% | ||
| EBIT | -25.5 | -1.5 | 9.7 | 39.0 | -75% | |
| EBIT margin, % | -14.6% | -0.7% | 1.3% | 4.3% | ||
| Profit for the period | -23.4 | -7.0 | -9.3 | 13.1 | ||
| Adjusted profit for the period¹ ³ | 7.5 | 1.7 | 329% | 32.2 | 32.7 | -2% |
| Earnings per share, basic, EUR | -0.59 | -0.17 | -0.32 | 0.32 | ||
| Adjusted earnings per share, basic, EUR¹ ³ | 0.15 | 0.04 | 262% | 0.68 | 0.79 | -14% |
| Cash flow from operating activities | 32.5 | 40.2 | -19% | 40.4 | 31.1 | 30% |
| Adjusted operating cash flow, last 12 months¹ ² | 75.1 | 44.0 | 71% | |||
| Cash conversion¹ ² | 81.4% | 47.4% | ||||
| Operating capital employed¹ | 294.7 | 305.0 | -3% | |||
| Return on operating capital employed, %¹ ³ | 2.9% | 12.2% | ||||
| Net debt¹ | 219.6 | 275.2 | -20% | |||
| Net debt / Adjusted EBITDA¹ | 2.38 | 2.96 | -20% |
¹ Purmo Group presents certain measures of financial performance, financial position and cash flows, which are alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority ('ESMA'). For the detailed definitions and reconciliation of alternative performance measures see page 42 in the January-December 2023 financial statements review.
² Change in net working capital includes assets held for sale. The 2022 comparison figure has been restated by EUR 9.6 million impairment charges related to the business in Russia.
³ Comparative figures have been restated due to change in calculation of the key figure, see page 43 in the January-December 2023 financial statements review.
CEO's review
The last quarter of 2023 was robust. Adjusted EBITDA reached EUR 21.1 million, which was a significant improvement of 30 per cent compared to the corresponding period last year. For the full year adjusted EBITDA came in at EUR 92.3 million. This is a strong achievement in a year that saw weak demand, largely caused by destocking by our customers as well as corrections in our markets and most of our product lines. Earnings were in line with the financial guidance announced at the beginning of the year. During 2023, the whole of Purmo Group worked hard with margin management actions, which were evidenced by a strong improvement in adjusted EBITDA margin of 12.4 per cent, a 2.1 percentage point uplift from last year. At the end of 2023, our balance sheet was also strengthened, and the net debt to adjusted EBITDA ratio, based on the last 12 months adjusted EBITDA, was 2.38 (31 Dec 2022: 2.96). This gives us room to pursue acquisition opportunities.
Growth in earnings in Climate Products & Systems, and high adjusted EBITDA margin in Climate Solutions demonstrated our resilience
During the fourth quarter, net sales for the Climate Products & Systems division decreased by 17 per cent compared to last year as markets remained weak. Neither residential new construction nor renovation showed signs of improvement, even though we saw some markets stabilising towards the end of the year. However, the division achieved a 33 per cent increase in adjusted EBITDA for the quarter. For the full year 2023, the division improved its adjusted EBITDA by 10 per cent and reached a 13.3 per cent adjusted EBITDA margin; an increase of 3.4 percentage points compared to last year.
This performance demonstrated the operational strength and continuous efficiency improvement of the Climate Products & Systems division in an environment that showed a heavy volume decline. During the fourth quarter, we completed the closure of our manufacturing operations in Zonhoven, Belgium and strengthened our operations in Rybnik, Poland. These actions reflect our commitment to maintaining a high proportion of our manufacturing close to our customers in Europe.
In our Climate Solutions division, net sales declined by 9 per cent during the quarter. After a longer period of downturn, our Italian markets picked up towards the end of the year. The businesses in France and Brazil showed good growth for the quarter, providing confidence in our solution-selling strategy. Strong margin management actions continued within the division. As a consequence, the adjusted EBITDA grew by 13 per cent during the quarter compared to last year and the adjusted EBITDA margin by 3.5 percentage points. For the full year 2023, adjusted EBITDA declined by 21 per cent compared to the previous year and the adjusted EBITDA margin was at 15.6 per cent, which is close to last year's levels despite the severe decline in the market and net sales during the year. Our solution-selling business in France demonstrated strong growth also in 2023, in addition to Ireland, which performed well during the year.
In 2023, both divisions remained focused on our strategy of offering solutions and systems across our core markets and developing unique relationships with Purmo Group's more than 100,000 installer customers.
Accelerate PG programme's target for 2024 increased to EUR 50 million
The strategy acceleration programme, Accelerate PG, continued to perform strongly and above targets during the quarter. Implemented adjusted EBITDA run-rate improvements reached EUR 30.1 million at the end of the year, which was higher than the earlier communicated target of above EUR 25 million. The periodic impact for the fourth quarter was EUR 6.4 million. The net working capital improvements within the programme were EUR 20.6 million at the end of 2023, which was above the original target of EUR 10 million.
As part of the programme, on 28 November 2023, we completed the consultation process concerning the discontinuation of our radiator production plant in Zonhoven and, on 10 January 2024, after the review period, we also communicated the launch of a consultation process to relocate our manufacturing from Hull, United Kingdom.
Thanks to the good results within the programme in 2023, we will move beyond implementing cost savings to growth initiatives in 2024. We have also upgraded the target for the programme for 2024. Cumulative adjusted EBITDA run-rate improvements will reach EUR 50 million, higher than the previously announced target of above EUR 40 million. We also aim for EUR 45 million in cumulative net working capital improvements by the end of 2024. This is above the earlier announced target of above EUR 30 million.
Agreement for supply of near zero-emission steel
In terms of sustainability, on 6 November 2023, we signed a binding agreement for the supply of near zero-emission steel during 2026-2033, when 140,000 tonnes of green steel will be delivered to us by H2 Green Steel. We also joined WWF Finland's campaign 'Ready For Green Steel' to encourage steel producers worldwide to transition to low-emission production to mitigate the climate crisis.
Guidance for 2024
Wholesalers' stock levels have stabilised, and the lower level of interest rates supports the expectations of a gradual market activity improvement. Our upgraded target for the strategy acceleration programme, Accelerate PG, further underpins Purmo Group's outlook for 2024.
Adjusted EBITDA in 2024 is expected to be on a similar or higher level than in 2023 (EUR 92.3 million).
News conference and webcast for analysts, investors and media
The publication will be followed at 10.00 a.m. EET by a live webcast and a teleconference to analysts, investors and media representatives. At the event, CEO John Peter Leesi and CFO Jan-Elof Cavander will present the results and answer questions in English.
Webcast: https://purmogroup.videosync.fi/q4-2023
Teleconference lines: https://palvelu.flik.fi/teleconference/?id=50048525
Participants should register through the above link to ask questions through the conference call lines. After registering they will receive a teleconference number and a code to join the call. Participants will be asked to press number 5 to join the queue for questions.
A recording of the event will be available at https://investors.purmogroup.com/ir-material/ shortly after the event has ended.
Purmo Group Plc
Further information:
Jan-Elof Cavander, Chief Financial Officer, Purmo Group Plc
Katariina Kataja, Head of Investor Relations, Purmo Group Plc, Tel. +358 40 527 1427
Distribution:
Nasdaq Helsinki Ltd
Principal media
investors.purmogroup.com
About Purmo Group:
Purmo Group is at the centre of the global sustainability journey, offering full solutions and sustainable ways of heating and cooling homes to mitigate global warming. We provide complete heating and cooling solutions to residential and non-residential buildings, including underfloor heating and cooling systems, a broad range of radiators, heat pumps, flow control and hydronic distribution systems, as well as smart products. Our mission is to be the global leader in sustainable indoor climate comfort solutions. Our approximately 3,190 employees operate in 24 countries, manufacturing and distributing top-quality products and solutions to our customers in more than 100 countries. Purmo Group's shares are listed on Nasdaq Helsinki with the ticker symbol PURMO. More information: www.purmogroup.com.
