Boreo Plc, HALF-YEAR REPORT JAN. 1 TO JUN. 30, 2024
August 7, 2024, at 9:00 EEST
A step in the right direction: decent result in a challenging market
April-June 2024
- Net sales decreased by 20% to EUR 33.8 million (2023: 42.3).
- Operational EBIT was EUR 2.4 million (2023: 2.4) and accounted for 7.0% of net sales (2023: 5.6%).
- EBIT was EUR 1.6 million (2023: 1.7).
- The profit for the period under review totaled EUR 0.8 million (2023: 1.0).
- Net cash flow from operating activities was EUR -1.9 million, which was negatively affected by the timing of working capital items (2023: 3.9).
- Operational EPS was EUR 0.31 (2023: 0.39).
- EPS was EUR 0.09 (2023: 0.18).
January-June 2024
- Net sales decreased by 20% to EUR 66.4 million (2023: 83.3).
- Operational EBIT declined by 34% to EUR 3.0 million (2023: 4.4) and accounted for 4.4% of net sales (2023: 5.3%).
- EBIT was EUR 1.2 million (2023: 3.1).
- The profit for the period under review totaled EUR 0.0 million (2023: 1.5).
- Net cash flow from operating activities was EUR 4.2 million (2023: 4.6).
- Operational EPS was EUR 0.16 (2023: 0.66).
- EPS was EUR -0.36 (2023: 0.25).
- Net debt relative to operational EBIT of the previous 12 months was 2.8 (2023: 2.4 and 2.4 at the end of the previous quarter).
- Return on capital employed was 9.2% (2023: 11.2% and 9.3% at the end of the previous quarter).
Financial guidance and business model
Boreo's primary objective is sustainable long-term profit generation. This is achieved with a business model that is based on the acquisition and ownership of great entrepreneurial companies with ability to generate sustainable long-term earnings growth and strong cash flows. The profits generated by the portfolio of companies are re-invested back to operations or to acquisitions with attractive expected returns on capital. The decentralized operating structure promoting culture of ownership and release of entrepreneurial energy is a core pillar of the firm's business concept and sustainable earnings growth is ensured through the support and coaching of companies and the personnel.
Boreo's focus is on earnings growth with attractive return on capital. The company's long-term strategic financial targets are:
- Minimum 15% average annual operational EBIT growth
- Minimum 15% Return on Capital Employed (ROCE)
- Net debt to operational EBITDA between 2 and 3 (including acquired businesses as if they had been held for 12 months at the reporting date)
Boreo's dividend policy is to pay an annually increasing dividend per share, considering capital allocation priorities.
The above-mentioned strategic financial objectives still serve as the company's financial guidelines. In line with its guidance policy, the company does not give separate short-term financial guidance.
Group's key figures
Key figures | |||||||
EUR million | Q2/2024 | Q2/2023 | Change | H1/2024 | H1/2023 | Change | 2023 |
Net sales | 33.8 | 42.3 | -20% | 66.4 | 83.3 | -20% | 161.3 |
Operational EBIT | 2.4 | 2.4 | 0% | 3.0 | 4.4 | -34% | 9.5 |
relative to the net sales, % | 7.0% | 5.6% | - | 4.4% | 5.3% | - | 5.9% |
EBIT | 1.6 | 1.7 | -4% | 1.2 | 3.1 | -61% | 6.3 |
Profit before taxes | 1.0 | 1.1 | -9% | 0.0 | 1.9 | -99% | 3.5 |
Profit for the period | 0.8 | 1.0 | -17% | 0.0 | 1.5 | - | 2.8 |
Net cash flow from operating activities | -1.9 | 3.9 | - | 4.2 | 4.6 | -8% | 11.6 |
Cash conversion, % | -61% | 165% | - | 161% | 104% | - | 129% |
Equity ratio, % | 40.1% | 36.4% | - | 40.1% | 36.4% | - | 36.2% |
Net debt | 32.7 | 35.7 | -9% | 32.7 | 35.7 | -9% | 36.0 |
Interest-bearing net debt relative to operational EBITDA of the previous 12 months* | 2.8 | 2.4 | - | 2.8 | 2.4 | - | 2.5 |
Return on capital employed (ROCE %), R12 | 9.2% | 11.2% | - | 9.2% | 11.2% | - | 11.0% |
Return on Trade Working Capital (ROTWC %), R12 | 28.3% | 29.0% | - | 28.3% | 29.0% | - | 30.3% |
Return on equity (ROE %), R12 | 3.0% | 11.3% | - | 3.0% | 11.3% | - | 6.7% |
Personnel at end of the period | 330 | 340 | -3% | 330 | 340 | -3% | 341 |
Operational EPS, EUR** | 0.31 | 0.39 | -21% | 0.16 | 0.66 | -76% | 1.40 |
EPS, EUR** | 0.09 | 0.18 | -50% | -0.36 | 0.25 | - | 0.47 |
Net cash flow from operating activities per share, EUR | -0.72 | 1.44 | - | 1.57 | 1.77 | -11% | 4.40 |
* Calculated in accordance with the calculation principles established with financiers. The formula for calculating the indicator is presented later in this report.
** The effect of the interest rate of the hybrid bond recorded in equity adjusted by the tax effect is considered in the calculation of the EPS starting from 2022. In Q2 2024, this net effect was EUR 0.18 per share, in H1 2024, the net effect was EUR 0.31 per share, in Q2 2023, it was EUR 0.12 per share, and in H2 2023, it was EUR 0.24 per share.
Q2/2024 - CEO Kari Nerg:
A step in the right direction
After a weak first quarter, we were able to restore the company's profitability to a decent level. As a result of the implemented cost-saving measures and strong sales margins, operational EBIT of EUR 2.4 million was at the level of last year. Profitability improved from 5.6% to 7%.
The market conditions remained challenging, and revenue was significantly (-20%) behind the previous year. Demand was low, especially in the construction business, and of the total decline of EUR 8 million, the decline in revenue from Putzmeister operations alone was EUR 5.5 million. In addition, revenue of the electronic component distribution businesses in the Baltics declined by EUR 2.4 million from last year. Floby Nya Bilverkstad, Filterit, and Infradex, on the other hand, recorded significantly higher revenues compared to last year.
The second-quarter operating cash flow was EUR -1.9 million mainly due to the expected seasonal increase in working capital. Operating working capital increased to EUR 28 million. ROCE was almost at the same level as the previous quarter (9.2%), and ROTWC improved from 27.6% to 28.3%.
Decent outlook
Order books of our companies decreased slightly from the end of the first quarter but remained at a higher level compared to the year-end. The most significant individual deliveries in the order books (including PM Nordic's machine deliveries to Construction Logistics Sweden AB) are expected to materialize in the last quarter of the year.
We expect market conditions to remain challenging in the second half of the year. The well succeeded implementation of cost actions and positive gross margin development, however, support the company's profit generation. In the second quarter, fixed costs decreased as expected and we are well in schedule to achieve the communicated annual fixed cost savings of at least EUR 1 million.
Improving profitability and deleveraging as key priorities
While the company's long-term strategic financial objectives remain unchanged, our main short-term target is to bring the company back to the growth-track and enable value creation by utilizing the updated strategy. To achieve this goal, we will continue to focus on improving the profitability of our companies and reducing the Group's indebtedness over the next quarters. Net debt relative to the 12-month operational EBITDA was at 2.8x that is clearly higher than our target level, taking into account the impact of hybrid loans on the company's capital structure and financing costs.
We are not pleased with the absolute profit level of the second quarter but as a result of the positive development from the first quarter of 2024 and the steps our companies have taken in optimizing costs and in their strategic development, create solid foundation for result improvement as market conditions improve.
Briefing for investors, analysts and media
A webcast where CEO Kari Nerg and CFO Aku Rumpunen present the half-year report will be held today, August 7, 2024, at 11:00 EEST. The presentation is in English and questions can be asked after the presentation. The presentation material is available before the webcast on Boreo's website: www.boreo.com/investors.
You can watch the webcast at: https://boreo.videosync.fi/q2-2024.
The event will be recorded and the recording will be available after the event at: www.boreo.com/investors.
Boreo Plc' financial reporting in 2024:
Interim report 1-9/2024: October 31, 2024
Vantaa, August 07, 2024
BOREO PLC
Board of Directors
Additional information:
Kari Nerg
CEO
tel +358 44 341 8514
Aku Rumpunen
CFO
tel +358 40 556 3546
Distribution:
NASDAQ Helsinki Ltd
Financial Supervisory Authority
Principal media
www.boreo.com
Boreo in brief:
Boreo is a company listed on Nasdaq Helsinki that creates value by owning, acquiring and developing small and medium-sized companies in the long-term. Boreo's business operations are organized into two business areas: Electronics and Technical Trade.
Boreo's primary objective is sustainable long-term profit generation. This is achieved with a business model that is based on the acquisition and ownership of great entrepreneurial companies with ability to generate sustainable long-term earnings growth and strong cash flows. The profits generated by the portfolio of companies are re-invested back to operations or to acquisitions with attractive expected returns on capital. The decentralized operating structure promoting culture of ownership and release of entrepreneurial energy is a core pillar of the firm's business concept and sustainable earnings growth is ensured through the support and coaching of companies and the personnel.
The Group's net sales in 2023 were EUR 161 million and it employs over 300 people in seven countries. The company's headquarter is in Vantaa.
