Sitowise Group Plc, Interim Report, 1 January - 30 September 2024, 7 November 2024 at 8:30 am EET
This release is a summary of Sitowise Group Plc's Interim Report January-September 2024. The complete report is attached to this release as a PDF file, and also available on the company's website at www.sitowise.com/investors/reports-and-presentations
July-September in brief
- Net sales decreased by 8.4% to EUR 41.8 (45.6) million. In constant currency net sales were down by 8.3%.
- Organic net sales growth was negative at -10.5% (1.0%).
- Adjusted EBITA was EUR 2.4 (3.5) million, or 5.8% (7.6%) of net sales.
- Operating profit decreased to EUR -0.2 (2.3) million, or -0.5% (5.0%) of net sales.
- Sitowise acquired LandPro Oy in September.
January-September in brief
- Net sales decreased by 8.8% to EUR 144.2 (158.1) million. In constant currency net sales were down by 8.7%.
- Organic net sales growth was negative at -10.3% (3.4%).
- Adjusted EBITA was EUR 8.4 (14.6) million, or 5.8% (9.2%) of net sales.
- Operating profit decreased to EUR 2.8 (11.4) million, or 1.9% (7.2%) of net sales.
- The order book declined somewhat during the quarter. Year-on-year the order book decreased by 7.7% to 154 (167) million euros.
- Leverage (net debt / adjusted EBITDA) was 5.0x (2.9x).
- The acquisition of Ahlman Group Oy's expert business was finalized in January and the acquisition of KM Project Oy's expert business in April.
The figures in the interim report are unaudited. Comparative figures for the corresponding period of the previous year are in brackets. The figures disclosed in the interim report are rounded so the sum of individual figures can deviate from the reported sum. This report has been published in Finnish and English. If there are any differences between the English translation and the original Finnish version, the Finnish report shall prevail.
| EUR million | 7-9/ 2024 | 7-9/ 2023 | Change, % | 1-9/ 2024 | 1-9/ 2023 | Change, % | 1-12/ 2023 |
| Net sales | 41.8 | 45.6 | -8.4% | 144.2 | 158.1 | -8.8% | 210.9 |
| EBITA, adjusted | 2.4 | 3.5 | -30.0% | 8.4 | 14.6 | -42.8% | 17.0 |
| % of net sales | 5.8% | 7.6% | 5.8% | 9.2% | 8.1% | ||
| EBITA | 1.3 | 3.3 | -60.7% | 6.5 | 13.9 | -53.1% | 15.1 |
| Operating profit | -0.2 | 2.3 | -109.7% | 2.8 | 11.4 | -75.1% | 11.7 |
| Result for the period | -1.5 | 0.8 | -289.6% | -1.1 | 6.4 | -116.8% | 5.5 |
| Cash flow from operating activities before financial items and taxes | -0.3 | -2.7 | 87.2% | 10.6 | 12.6 | -16.0% | 23.9 |
| Net debt | 60.3 | 62.2 | -3.1% | 55.3 | |||
| Net debt / EBITDA, adjusted | 5.0x | 2.9x | 69.8% | 3.0x | |||
| Equity ratio, % | 44.6% | 44.7% | 42.9% | ||||
| Earnings per share (EPS), EUR | -0.04 | 0.02 | -283.4% | -0.03 | 0.18 | -114.6% | 0.16 |
| Number of personnel, average | 2,110 | 2 216 | -4.8 % | 2,113 | 2,224 | -5.0% | 2,211 |
CEO Heikki Haasmaa: Infra and Digital Solutions outperformed markets in terms of net sales and profitability, foundation for the Swedish turnaround now established
In the third quarter of 2024, Sitowise faced a challenging market environment with net sales decreasing by 8.4% to 41.8 million euros and adjusted EBITA margin that totaled 5.8%. Despite mixed market conditions, our Infra and Digital Solutions business areas outperformed their markets both in terms of net sales development and very strong profitability. The Buildings business area continued to struggle due to the weak Finnish construction market, particularly in new build residential housing, which has caused the significant decline in net sales. While the Swedish business still remained notably loss-making, we took decisive actions to turn around the business.
During the quarter, we focused heavily on optimizing and aligning resources in our Sweden and Buildings businesses as part of our 'Building for the Future' program. In Sweden, we reduced headcount by approximately 10%, both from project teams with low utilization rates and from administrative teams, to better match the current order book level. We are also streamlining operations into a nationwide model to enhance client and sales activity, efficiency, and agility. In the Buildings business area, we continued temporary layoffs and optimized organization and processes to increase client proximity and operational efficiency. These actions together incurred one-off restructuring costs in the third quarter, and we expect related savings of approximately 3.5 million euros on annual level to materialize in the upcoming quarters.
Across all business areas, we promoted proactive sales, pricing excellence, and cost awareness. Sales activity increased significantly, particularly in our defined growth segments of sustainability, renewable energy, industry, and security. We recorded several strategic project wins, including a major alliance project related to the Western part of the Vantaa light rail. I am pleased with the progress in proactive sales and creating a foundation for future profitability and growth.
The Infra business reformed its organization to support future growth by creating a new unit focusing on environmental and sustainability business, which has grown significantly in recent years. The priority in the Digital Solutions business was to develop its existing SaaS offering, which is growing at double-digit rates and attracting increased interest from new client segments.
Thanks to the actions under the 'Building for the Future' program, there is good momentum for the Sweden business to clearly improve its profitability in the final quarter of the year. I have confidence that our Infra and Digital Solutions businesses will continue their solid performance, whereas the short-term outlook in our Buildings business continues to be unfavorable until the market upturn supports growth.
Our strong market position and strategic focus on smart services and new business models, such as our AI-driven solutions and SaaS products, position us well to disrupt the industry. These initiatives, supported by megatrends and increasing client interest, provide a promising mid- and long-term outlook for our company.
OUTLOOK, GUIDANCE, AND FINANCIAL TARGETS
Outlook for the year 2024
The long-term growth in the demand for design, consulting, and digital services to create sustainable societies is supported by megatrends such as urbanization, renovation backlog, sustainability, digitalization and security.
In 2024, weak macro-economic outlook and high interest rates have slowed down growth in both Finland and Sweden and impacted the short-term decision-making of Sitowise's clients especially in the private sector and most of all in residential building projects. Furthermore, general economic environment has adversely impacted larger public sector investments, and central banks' interest rate cuts have materialized later and on a more moderate scale than expected, thus delaying the construction market recovery.
We expect the technical consulting market environment to remain mixed in the final quarter of 2024. Growing demand for services related to green transition, security, and digitalization will support business performance especially in the Infra and Digital Solutions business areas. In the Buildings business area, the final quarter of the year will still be weak. Sitowise considers the timing of the construction market recovery to be highly uncertain and anticipates the construction market to start recovering more in the second half of 2025. In the Sweden business area, Sitowise expects a clear improvement in profitability in the final quarter of the year and returning to gradual net sales growth in 2025. In Sweden the construction market recovery is generally expected to take place slightly ahead of Finland.
At the end of September 2024, order books were at good level in the Infra and Digital Solutions businesses. In the Buildings business, order book and workload were at insufficient levels and temporary layoffs have been continued into the fourth quarter. In Sweden the resources have been adjusted in the third quarter to the existing low order book volumes.
In addition to the market development, cost inflation (e.g. relating to salary increases), potential currency fluctuations (EUR/SEK) and high interest expenses are expected to impact Sitowise's financial performance during the latter half of 2024. In the fourth quarter 2024 the number of working days the same than in the previous year.
Guidance (issued on 31 July 2024)
Sitowise Group's net sales is expected to decline in 2024, driven by the Buildings business decline and weakened growth outlook in Sweden for the second half of the year. In year 2024, the adjusted EBITA margin (%) is expected to be lower than in 2023.
Long-term financial targets
The Board of Directors of Sitowise Group has set the following long-term financial targets:
- Growth: Annual growth in net sales of more than 10 percent, including acquisitions
- Profitability: Adjusted EBITA margin of at least 12 percent
- Leverage: Net debt / adjusted EBITDA should not exceed 2.5x, except temporarily in conjunction with acquisitions
According to its dividend policy, Sitowise's objective is to pay annually a dividend corresponding to 30-50 percent of net profit to its shareholders.? When distributing a possible dividend, business acquisitions, the company's financial situation, cash flow and future growth opportunities are taken into account.
Market outlook and current profitability
| Share of net sales | Market outlook | Current profitability | |
| Infra | 37% | Stable | Above target |
| Buildings | 29% | Weak | Negative |
| Digital Solutions | 16% | Stable (improving) | Above target |
| Sweden | 18% | Weak (improving) | Negative |
| Timeframe: | Q3 2024 | Next 12 months | Q3 2024 |
| Definitions: | Percentage of consolidated net sales | Strong / Stable / Weak | Adj. EBITA-%: Above: >12%; In line: 10-12%; Below: 5-10%; Clearly below: 0-5%; Negative <0% |
SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
Flagging notifications
Between 4 October and 6 November 2024, Sitowise Group Plc received a total of 12 notifications in accordance with Chapter 9, Section 5 of the Finnish Securities Markets Act from Morgan Stanley. According to these notifications, Morgan Stanley's indirect holding of shares and votes in Sitowise Group Plc had either exceeded or fallen below the 5.00 or 10.00 percent threshold of all shares and votes as a result of stock borrowing agreements. According to the latest flagging notification, Morgan Stanley held on 5 November 2024, as a result of stock borrowing agreements, indirectly a total of 907,730 shares corresponding to 2.35 percent of the Company's shares and votes, and a total of 1,595,251 shares through financial instruments corresponding to 4.45 percent of the Company's shares and votes.
Espoo, 7 November 2024
Sitowise Group Plc
Board of Directors
Additional information
Heikki Haasmaa, CEO, heikki.haasmaa@sitowise.com, tel. +358 50 304 7765
Hanna Masala, CFO, hanna.masala@sitowise.com, tel. +358 40 558 1323
Mari Reponen, Head of IR, mari.reponen@sitowise.com, tel. +358 40 702 5869
Financial calendar 2025
The planned publication dates for Sitowise Group Plc's financial reports in 2025 are as follows:
- Financial Statements Report 2024: 12 February 2025
- Interim Report for January-March 2025: 13 May 2025
- Half-year report for January-June 2025: 13 August 2025
- Interim Report for January-September 2025: 6 November 2025
Webcast for analysts. media and investors
Sitowise's Q32024 earnings webcast will be held today. 7 November 2024. at 12 pm EEST. The webcast can be accessed either live or as a replay available at
https://rajucast.tv/en/sitowise/sitowise-q3-2024-result-webcast/
Distribution:
Nasdaq Helsinki Ltd
Key media
www.sitowise.com
SITOWISE IN BRIEF:
Sitowise is a Nordic expert in the built environment and forestry with strong focus on digitality. We provide design and consulting knowhow to enable more sustainable and smarter urban development as well as smooth transportation. Sitowise offers services related to real estate and buildings, infrastructure, and digital solutions both in Finland and in Sweden. Global megatrends drive huge changes that require a re-evaluation of the smartness in the built environment - therefore we have set our vision to be Redefining Smartness in Cities. The Group's net sales were EUR 211 million in 2023 and the company employs more than 2,100 experts. Sitowise Group Plc is listed on Nasdaq Helsinki under the trading symbol SITOWS.
