Harju Elekter Group financial results, 1-6/2016

27.07.2016 Reports

The Group’s reporting quarter was successful. The consolidated sales revenue in the accounting quarter was 17.2 (H1 2015: 16.6) million euros, increased by 46% or 5.6 million euros compared to the previous quarter, and 4% or 0.6 million euros in relation to the comparison period. In H1, the consolidated sales revenue increased by 5.2% up to 29.0 (H1 2015: 27.5) million euros. The consolidated net profit of the H1 2016 was 2.0 million euros, which was 25.8% more than in the comparison period.

Change

April – June

Change

January – June

Year

(thousand euros)

%

2016

2015

%

2016

2015

2015

Sales revenue

3.7

17,208

16,590

5.2

28,965

27,535

60,656

Gross profit

2.3

3,153

3,081

9.3

5,222

4,779

10,299

EBITDA

-2.6

1,705

1,751

16.4

2,486

2,139

4,819

EBIT

-7.2

1,281

1,380

18.6

1,671

1,408

3,276

Profit for the period

6.0

1,668

1,573

25.8

1,979

1,573

3,186

incl attributed to Owners of the Company

6.9

1,664

1,557

27.7

1,988

1,557

3,190

There has been a growth in sales revenue among almost all products and services. 93% (Q2 2015: 92%) of the reporting quarter sales revenue was earned from the Production segment, and Real Estate together with other areas of activity contributed 7% (Q2 2015: 8%) of the consolidated sales volume. The sale of electric equipment had increased by 5% or 935,000 euros in comparison with the comparison period and by 7% or 1,652 thousand euros in 6 month comparison, providing 86% of the sales revenue of the Group. The addition of the new rental premises in 2015 has increased the rental revenue by 9% of 95,000 euros in the first six months of 2016.

In H1 2016, 78% (H1 2015: 76%) of the Group’s products and services were sold in foreign markets, outside Estonia and in the reporting quarter 81% (Q2 2015: 79%). As a result, that most of the Group’s subsidiaries increased them sales to Finland, the Group’s biggest market has grown by 16% or 1,735 thousand euros over a year. 72% (H1 2015: 64%) of the Group’s products and services were sold on the Finnish market in the reporting quarter.

Sales revenues from the Estonian market continued to decrease. During the reporting quarter 19% (Q2 2015: 21%) of the Group’s products and services were sold on the Estonian market. In 6 months, the share of Estonian market has dropped by two percentage points.

Operating expenses increased 5% in the reporting quarter and 4% in the first half of the year compared to the reference periods. Cost of sales increased 4% in the reporting period. Distribution costs increased by 19% in the reporting quarter and by 12% in H1 in relation to the comparison periods, the rate of distribution costs to revenue accounted for 5.2% (H1 2015: 4.9%). Administrative expenses increased by 7% in the reporting quarter, remaining on the same level in the H1 comparison. The rate of administrative expenses to revenue accounted for 7.1%, having decreased by 0.4 percentage points.

The optimisation of production that started in the second half of 2015 in the Estonian undertakings of the Group has brought about the reduction of the number of employees. In Q2 2016 as well as in H1 2016, the average 454 people worked in the Group; there were on the average by 20 persons less in H1 and by 27 persons less in Q2 compared to the reference periods. In the reporting quarter, employee wages and salaries totalled 2,335 (Q2 2015: 2,414) thousand euros and during the first 6 months 4,709 (H1 2015: 4,802) thousand euros. The average wages per employee per month amounted to 1,730 (H1 2015: 1,688) euros.

The optimisation of production, which began in the second half of the past year and is continuing in 2016, has improved the profit of the reporting period and the profit margins when compared to the reference period.

In 1H the gross profit of the Group was 5,222 (H1 2015: 1,408) thousand euros. The gross profit margin was 18.0% (H1 2015: 17.4%). In Q2 the gross profit margin was 18.3% (Q2 2015: 18.6%).

In H1 2016, the Group’s operating profit was 1,671 (H1 2015: 1,408) thousand euros and EBITDA 1,671 (H1 2015: 1,408) thousand euros. Return of sales for the 6-months period was 5.8% (H1 2015: 5.1%) and return of sales before depreciation 8.5% (H1 2015: 7.8%).

The Group’s operating profit in the reporting quarter was 1,281 (Q2 2015: 1,380) thousand euros and EBITDA 1,705 (Q2 2015: 1,751) thousand euros. Return of sales for the accounting quarter was 7.4% (Q2 2015: 8.3%) and return of sales before depreciation 10.0% decreasing by 0.5 per cent point, compering to the same period a year before. Q2 2016 was the time, when the Group made one-off expenses in the amount of 71,000 euros upon merging the metal factories.

The consolidated net profit of the Q2 2016 was 1,668 (Q2 2015: 1,573) thousand euros, of which the share of the owners of the Company was 1,664 (Q2 2015: 1,557) thousand euros. EPS in the Q2 as well as in the reference period was 0.09 euros. The net profit margin was 9.7% (Q2 2015: 9.5%).

Overall, the consolidated net profit of the H1 2016 was 1,979 (H1 2015: 1,583) thousand euros. The share of the owners of the Company was 1,988 (H1 2015: 1,572) thousand euros. In H1, EPS was 0.11 (H1 2015: 0.09) euros.

During the 6-months period, the Group’s investments to non-current assets totalled 478 (H1 2015: 2,047) thousand euros. In H1 2015, the Group invested 1,272,000 euros in its production facilities at Allika Industrial Park. In the second half of 2016, Allika Industrial Park will see the beginning of the construction of the next major production complex, adding further 8400 m2 in rental premises, and the construction of Stera Technologies Oy and Laohotell for proposed rental premises of 4100 m2.

Main events and post-balance events

On 28 April 2016, the AGM of shareholders of AS Harju Elekter was held; it approved the 2015 annual report and distribution of profit as well as the decision to pay the shareholders a dividend of 0.05 euros per share, or a total of 887,000 euros, for 2015. In addition, the AGM decided to introduce a no par value share and approve the new version of the articles of association of AS Harju Elekter. By virtue of the decision of the AGM, the share capital of AS Harju Elekter will be reduced by 1 242,000 euros, to 11,176,124.40 euro, by means of a reduction of the book value of the shares. Payments of 0.07 euros per share to the shareholders will be made during the term prescribe by law. The shareholders registered in the shareholders’ registry on 12 May 2016 at 23.59 entitled to dividend as well as reduction of share capital. The dividends was paid to the shareholders on 17 May 2016 by a transfer to the bank account of the shareholder.

In April 2016, a preliminary contract was concluded with Stera Technologies Oy that produces mechanical and electromechanical equipment and parts for the construction and subsequent rental production facilities in Allika Industrial Park, which belongs to the Group. The total size of the production facilities is 8400 m2 and they will be delivered to the lessee in two stages, in July 2017 and October 2018. Allika Industrial Park conducted a procurement to identify a project manager, with Ehitusfirma Rand ja Tuulberg AS qualifying. Both the production facilities to be built for Stera Technologies OÜ and the Laohotell site have received building permits.

At its 5 April 2016 meeting, the Supervisory Board of AS Harju Elekter decided to merge the metal factories of the Group’s Estonian subsidiaries, consolidating the sheet metal processing resources, capability and know-how of the entire Group into AS Harju Elekter Teletehnika. The outcome of restructuring is economy in terms of manufacturing as well as labour costs. After the changes, AS Harju Elekter Teletehnika will focus on the manufacturing of sheet metal products and details for the electrical engineering and telecommunications sector, while also maintaining the production line for telecommunications products and fibre-optic cables. At the same time, the reorganization will enable AS Harju Elekter Elektrotehnika to focus its activities to the core business – manufacturing of electrical equipment, and make it more efficient.

The general meeting of the shareholders of PKC Group Oyj, which gathered on 4 April 2016, decided to pay dividends in the amount of 0.70 euros per share. Dividends were transferred to the shareholders’ bank accounts on 15 April 2016. AS Harju Elekter owns 1,094,641 shares. The dividend income of 766,000 euros is reflected in the profit of Q2 2016. The 15% income tax withheld from the dividends in Finland comprised 115,000 euros. The dividends of PKC Group add 651,000 euros to the cash flow from investment activities in Q2.

AS Harju Elekter decided to provide Skeleton Technologies OÜ with a loan of 660,000 euros (of which, 330,000 euros was issued in the reporting quarter and 330,000 euros after the balance sheet date). In the event of an additional round of funding, the loan will be converted into share capital in order to preserve the holding of AS Harju Elekter.

In February, our Finnish subsidiaries Satmatic Oy and Finnkumu Oy participated in the local trade fair Sähkö-Tele-Valo-AV in Jyväskylä. In the beginning of April, AS Harju Elekter Kaubandusgrupp presented its product range in Tallinn at the international building fair Estbuild.

Andres Allikmäe
Managing director/ CEO
+372 674 7400

For more information: Interim report 1-6/2016

AS HARJU ELEKTER
CONSOLIDATED BALANCE SHEET, 30.06.2016
Unaudited
EUR’000
ASSETS 30.06.16 31.12.15
Cash and cash equivalents 4 476 5 711
Trade receivables and other receivables 9 007 6 678
Prepayments 372 278
Prepaid income tax 25 28
Inventories 9 807 7 148
TOTAL CURRENT ASSETS 23 687 19 843
Deferred income tax asset 57 57
Other long-term financial investments 20 954 20 188
Investment property 12 912 12 990
Property, plant and equipment 7 850 8 010
Intangible assets 5 442 5 491
Total non-current assets 47 215 46 736
TOTAL ASSETS 70 902 66 579
LIABILITIES AND OWNERS’ EQUITY
Interest-bearing loans and borrowings 148 296
Trade payables and other payables 8 260 6 043
Payables to shareholders 1 242 0
Tax liabilities 1 413 944
Income tax liabilities 103 146
Short-term provision 4 34
TOTAL CURRENT LIABILITIES 11 170 7 463
NON-CURRENT LIABILITIES 912 912
TOTAL LIABILITIES 12 082 8 375
Share capital 12 418 12 418
Unregistered share capital -1 242 0
Share premium 804 804
Restricted reserves 18 836 18 047
Retained earnings 27 895 26 817
TOTAL OWNERS’ EQUITY 58 711 58 086
Non-controlling interests 109 118
TOTAL EQUITY 58 820 58 204
TOT.LIABILIT.AND OWNERS’ EQUITY 70 902 66 579
CONSOLIDATED INCOME STATEMENT,  1-6/2016
Unaudited
EUR’000 Q2 2016 Q2 2015 6m 2016 6m 2015
NET SALES 17 208 16 590 28 965 27 535
Cost of goods sold -14 055 -13 509 -23 743 -22 756
Gross profit 3 153 3 081 5 222 4 779
Distribution costs -789 -663 -1 512 -1 347
Administrative expenses -1 104 -1 028 -2 051 -2 054
Other income 42 7 52 61
Other expenses -21 -17 -40 -31
Operating profit 1 281 1 380 1 671 1 408
Finance income 766 771 767 785
Finance costs -5 -22 -11 -29
Profit from normal operations 2 042 2 129 2 427 2 164
Corporate Income tax -374 -556 -448 -581
Profit for the period, attributable to 1 668 1 573 1 979 1 583
   owners of the Company 1 664 1 557 1 988 1 572
   non-controlling interest 4 16 -9 11
Basic earnings per share  (EUR) 0,09 0,09 0,11 0,09
Diluted earnings per share  (EUR) 0,09 0,09 0,11 0,09

Interim report 1-6/2016

Tiit Atso
CFO
+372 674 7422

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