The Group’s consolidated revenue increased by 48.3% to 26.0 million euros in the reporting quarter. The increase in sales revenue was supported by the acquisition of new business combinations in the second half of 2017. Q1 2018 profitability of the Group were below the initial expectations as a result of several combined impacts. In addition to the regular seasonality, the profitability of the quarter was influenced by postponed installation of works of many clients due to the cold winter months, resulting in a large quantity of production into the warehouse. In Q1, the heating and electricity costs also increased notably; in addition, several preparations and development works were undertaken to perform the new procurement contracts of Sweden and Finland. At the same time, positive trends in the market and high volume of order book is promising, looking at the upcoming quarters.
|
Change % |
January – March |
Year |
||
| (thousand euros) |
|
2018 |
2017 |
2017 |
| Sales revenue |
48.3 |
25,986 |
17,519 |
102,668 |
| Gross profit |
25.2 |
3,344 |
2,670 |
15,625 |
| EBITDA |
-19.1 |
849 |
1,050 |
7,587 |
| EBIT |
-65.4 |
231 |
668 |
5,442 |
| Profit for the period |
-99.6 |
102 |
25,366 |
29,132 |
| incl attributed to Owners of the Company |
-99.5 |
133 |
25,374 |
29,129 |
During the reporting quarter 79.2% (Q1 2017: 91.9%) of revenue was earned from the Manufacturing segment, Real Estate and Unallocated activities contributed 20.8% (Q1 2017: 8.1%) of the consolidated sales volume. In August 2017, AS Stera Saue opened new production hall and warehouses in the Allika Industrial Park owned by AS Harju Elekter, which has increased sales revenue from the Real Estate Segment for the comparable period. The sales revenue of Unallocated activities has increased by 3.9 million euros to 4.8 million euros in the quarterly comparison, of which electrical installation work comprised 71.3% (Telesilta Oy acquired in June 2017).
Sales revenue increased for the comparable period for all products and services. The biggest contribution to the 8.5 million growth came from greater sales volumes of electrical equipment within 52.6% and new electrical installation works within 40.2%, added to the services of the Group in 2017. Sales of electrical equipment increased by 4.5 million euros to 19.8 million euros in comparison with the quarter.
The Group’s sales revenue earned outside Estonia accounted for 89.1% in Q1 2018 (Q1 2017: 77.4%) increasing by 9.6 million to 23.2 million euros.
The Group’s largest market is Finland. Compared to the reference period, sale to the Finnish market has grown by 54.1% or 6.3 million euros to 18.0 million euros. The main reason for the growth was the contracts concluded with Finnish grid companies at the end of the years 2016 and 2017. Telesilta Oy, acquired in June 2017, also made a significant contribution to the growth of the Finnish market. In the reporting quarter, 69.1% of the Group’s products and services (Q1 2017: 66.5%) were sold on the Finnish market.
Compared to Q1 2017, the sales revenue to Swedish market has doubled, to 2.0 million euros. The growth came from Group’s and AS Harju Elekter Elektrotehnika purposeful work to increase market share in Sweden and combining new companies to the Group. AS Harju Elekter Elektrotehnika participation in several tenders resulted a 3-year frame agreement to deliver substations to E.ON Energidistribution AB. The deliveries of substation will start in Q2.
In the reporting quarter, the Lithuanian subsidiary Rifas UAB continued to increase its order volumes from Norway. Compared to Q1 2017, deliveries to the Norwegian market increased threefold to 2.0 million euros, accounting for 8.0% of consolidated sales revenue (Q1 2017: 4.0%).
Sales from other markets were majority earned from Austria, Denmark and the Netherlands.
Due to the low level of investment in the energy distribution sector, sales to the Estonian market in the first quarter decreased by 28.8% to 2.8 million euros and accounted for 10.9% of the consolidated sales revenue of the reporting quarter.
Operating expenses increased by 52.9%, i.e. 8.9 million euros in the reporting quarter compared to the reference period. The main reason for the upsurge in costs was the increase in the cost of sales by 7.8 million euros in Q1 2018 compared to Q1 2017, exceeding the growth rate of sales revenue, while at the same time decreasing the gross profit margin by 2.3 percentage point compared to the reference period. Labour costs increased by 53.5% up to 5.6 million euros. The rate of labour costs accounted for 21.7% of the reporting quarter sales revenue, decreasing by 0.7 percentage points for the comparable period. The Group’s distribution costs increased by 45.9% and the rate of distribution costs accounted for 4.5% of the sales revenue in the reporting quarter (Q1 2017: 4.5%). Administrative expenses increased by 0.7 million euros in the reporting quarter. The Group has incurred expenditures on the preparation of new procurements and completing the acquisition of new subsidiaries in 2018. Besides that, the exponential rise in the volume of specific orders has brought with it the need to hire additional specialists. All this has grown the rate of administrative expenses to revenue to 7.4% in Q1 2018 (Q1 2017: 6.7%). The growth in administrative expenses is mainly due to the increase in development costs.
In Q1 2018, an average of 679 employees worked in the Group, which was 189 people more than in the comparable period. At the end of the reporting period, there were 699 people working in the Group, which was 182 persons more than a year earlier. Including with the acquisition of SEBAB AB and Grytek AB, 45 employees were added to the Group. In the reporting quarter, 4,375 (Q1 2017: 2,616) thousand euros were paid to the employees as salaries and fees. The growth of salary cost was due to hiring new employees related to the significant increase in production volumes and the acquisition of new Swedish subsidiaries. In the reporting quarter, the average monthly salary per employee of the Group was 2,147 euros, an average increase of 367 euros.
In the reporting quarter, the gross profit of the Group was 3,344 (Q1 2017: 2,670) thousand euros. The gross profit margin was 12.9% (Q1 2017: 15.2%). The decline in profitability was caused by wage pressure of employees due to overall economic health and in the comparison of quarters, the price of raw material, above all sheet metal, has increased, which also raised the level of cost of sales.
In the reporting quarter, the Group’s operating profit was 231 (Q1 2017: 668) thousand euros and EBITDA 849 (Q1 2017: 1,050) thousand euros. Return of sales for the reporting quarter was 0.9% (Q1 2017: 3.8%) and return of sales before depreciation 3.3% (Q1 2017: 6.0%).
The profit before taxes for the reporting quarter was 229 (Q1 2017: 25,505) thousand euros. The calculated income tax expense of three months was 127 (Q1 2017: 139) thousand euros.
In Q1, several Group companies were influenced by the lower than expected volume of orders due to seasonality, being the main cause of the decline in profitability. Preparations for new procurements continue, leading to higher development costs, and several professionals have been hired.
In the reporting quarter, the consolidated net profit was 102 (Q1 2017: 25,366) thousand euros, of which the share of the owners of the Company was 133 (Q1 2017: 25,374) thousand euros. EPS in the Q1 2018 was 0.01 euros (Q1 2017: 1.43 euros). The consolidated net profit without extraordinary income of the Q1 2017 (the result of one-time financial income from the sale of the PKC Group Oyj shares in amount of 24,839 thousand euros) was 527 thousand euros.
In Q1 2018, the Group has made a total of 2.3 (Q1 2017: 1.7) million euros worth of investments to fixed assets, incl. acquisitions through business combinations amounted to 1.0 (Q1 2017: 0.4) million euros. Investment growth is related to the ongoing developments of Allika Industrial Park as well as investments into the production.
During Q1 2018, Harju Elekter’s share in Nasdaq Tallinn increased by 24.8% from 5.00 euros up to 6.24 euros.
Andres Allikmäe
Chairman of the Management Board
+372 674 7400
For more information: Tiit Atso, CFO, +372 674 7400 or Interim report 1-3/2018
| AS HARJU ELEKTER | ||
| CONSOLIDATED BALANCE SHEET,31.03.2018 | ||
| Unaudited | ||
| EUR’000 | ||
| ASSETS | 31.03.18 | 31.12.17 |
| Cash and cash equivalents | 3,778 | 10,992 |
| Available-for-sale financial assets | 9,845 | 9,935 |
| Trade receivables and other receivables | 19,540 | 13,575 |
| Prepayments | 1,289 | 1,118 |
| Prepaid income tax | 236 | 56 |
| Inventories | 18,248 | 13,037 |
| TOTAL CURRENT ASSETS | 52,936 | 48,713 |
| Deferred income tax asset | 56 | 56 |
| Other long-term financial investments | 4,696 | 4,684 |
| Investment property | 18,374 | 17,881 |
| Property, plant and equipment | 12,359 | 11,983 |
| Intangible assets | 7,477 | 6,660 |
| TOTAL NON-CURRENT ASSETS | 42,962 | 41,264 |
| TOTAL ASSETS | 95,898 | 89,977 |
| LIABILITIES AND OWNERS’ EQUITY | ||
| Interest-bearing loans and borrowings | 2,500 | 625 |
| Advances from customers | 1,518 | 1,088 |
| Trade payables and other payables | 16,368 | 12,802 |
| Tax liabilities | 2,806 | 2,106 |
| Income tax liabilities | 11 | 270 |
| Short-term provision | 49 | 245 |
| TOTAL CURRENT LIABILITIES | 23,252 | 17,136 |
| NON-CURRENT LIABILITIES | 2,720 | 2,910 |
| TOTAL LIABILITIES | 25,972 | 20,046 |
| Share capital | 11,176 | 11,176 |
| Share premium | 804 | 804 |
| Restricted reserves | 2,737 | 2,844 |
| Retained earnings | 55,181 | 55,048 |
| TOTAL OWNERS’ EQUITY | 69,898 | 69,872 |
| Non-controlling interests | 28 | 59 |
| TOTAL EQUITY | 69,926 | 69,931 |
| TOTAL LIABILITIES AND OWNERS’ EQUITY | 95,898 | 89,977 |
| CONSOLIDATED INCOME STATEMENT, 1-3/2018 | ||
| Unaudited | ||
| EUR’000 | Q1 2018 | Q1 2017 |
| Revenue | 25,986 | 17,519 |
| Cost of goods sold | -22,642 | -14,849 |
| Gross profit | 3,344 | 2,670 |
| Distribution costs | -1,161 | -796 |
| Administrative expenses | -1,930 | -1,182 |
| Other income | 14 | 2 |
| Other expenses | -36 | -26 |
| Operating profit | 231 | 668 |
| Finance income | 102 | 24,846 |
| Finance costs | -104 | -9 |
| Profit from normal operations | 229 | 25,505 |
| Corporate income tax | -127 | -139 |
| Profit for the period, attributable to | 102 | 25,366 |
| owners of the Company | 133 | 25,374 |
| non-controlling interests | -31 | -8 |
| Basic earnings per share (EUR) | 0.01 | 1.43 |
| Diluted earnings per share (EUR) | 0.01 | 1.43 |
Tiit Atso
CFO
+372 674 7400
