Boreo Plc, INTERIM REPORT JAN. 1 TO SEP. 30, 2024
Boreo Plc, INTERIM REPORT JAN. 1 TO SEP. 30, 2024
October 31, 2024, at 9:00 EET
The overall situation remains challenging
June-September 2024
- Net sales decreased by 31% to EUR 28.4 million (2023: 41.0).
- Operational EBIT declined to EUR 1.8 million (2023: 2.9) and accounted for 6.2% of net sales (2023: 7.1%).
- EBIT was EUR 1.1 million (2023: 2.0).
- The profit for the period under review totaled EUR 0.3 million (2023: 1.0).
- Net cash flow from operating activities was EUR 0.7 million (2023: 4.9).
- Operational EPS was EUR 0.10 (2023: 0.48).
- EPS was EUR -0.07 (2023: 0.22).
January-September 2024
- Net sales decreased by 24% to EUR 94.8 million (2023: 124.3).
- Operational EBIT declined by 37% to EUR 4.7 million (2023: 7.4) and accounted for 4.9% of net sales (2023: 5.9%).
- EBIT was EUR 2.4 million (2023: 5.1).
- The profit for the period under review totaled EUR 0.3 million (2023: 2.6).
- Net cash flow from operating activities was EUR 4.9 million (2023: 9.5).
- Operational EPS was EUR 0.26 (2023: 1.15).
- EPS was EUR -0.43 (2023: 0.47).
- Net debt relative to operational EBITDA of the previous 12 months was 3.3 (2023: 2.4 and 2.8 at the end of the previous quarter).
- Return on capital employed was 7.9% (2023: 11.2% and 9.2% 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 the 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 |
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EUR million | Q3/2024 | Q3/2023 | Change | Q1-Q3/2024 | Q1-Q3/2023 | Change | 2023 |
Net sales | 28.4 | 41.0 | -31% | 94.8 | 124.3 | -24% | 161.3 |
Operational EBIT | 1.8 | 2.9 | -40% | 4.7 | 7.4 | -37% | 9.5 |
relative to the net sales, % | 6.2% | 7.1% | - | 4.9% | 5.9% | - | 5.9% |
EBIT | 1.1 | 2.0 | -43% | 2.4 | 5.1 | -54% | 6.3 |
Profit before taxes | 0.4 | 1.4 | -73% | 0.4 | 3.2 | -88% | 3.5 |
Profit for the period | 0.3 | 1.0 | -66% | 0.3 | 2.6 | - | 2.8 |
Net cash flow from operating activities | 0.7 | 4.9 | -86% | 4.9 | 9.5 | -48% | 11.6 |
Cash conversion, % | 24% | 208% | - | 106% | 144% | - | 129% |
Equity ratio, % | 41.0% | 34.9% | - | 41.0% | 34.9% | - | 36.2% |
Net debt | 34.9 | 36.5 | -4% | 34.9 | 36.5 | -4% | 36.0 |
Interest-bearing net debt relative to operational EBITDA of the previous 12 months* | 3.3 | 2.4 | - | 3.3 | 2.4 | - | 2.5 |
Return on capital employed (ROCE %), R12 | 7.9% | 11.2% | - | 7.9% | 11.2% | - | 11.0% |
Return on Trade Working Capital (ROTWC %), R12 | 24.2% | 30.1% | - | 24.2% | 30.1% | - | 30.3% |
Return on equity (ROE %), R12 | 1.8% | 8.4% | - | 1.8% | 8.4% | - | 6.7% |
Personnel at end of the period | 323 | 348 | -7% | 323 | 348 | -7% | 341 |
Operational EPS, EUR** | 0.10 | 0.48 | -80% | 0.26 | 1.15 | -78% | 1.40 |
EPS, EUR** | -0.07 | 0.22 | - | -0.43 | 0.47 | - | 0.47 |
Net cash flow from operating activities per share, EUR | 0.25 | 1.83 | -86% | 1.82 | 3.63 | -50% | 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 Q3 2024, this net effect was EUR 0.19 per share, in Q1-Q3 2024, the net effect was EUR 0.50 per share, in Q3 2023, it was EUR 0.12 per share, and in Q1-Q3 2023, it was EUR 0.36 per share.
Q3/2024 - CEO Kari Nerg:
The overall situation remains challenging
Due to market conditions, the third quarter of 2024 continued to be challenging in line with the first half of the year. Our performance is currently modest compared to the recent history and the potential of the company portfolio. Our indebtedness is high and we are not at the level of our long-term targets. This is the result of the demand for the company portfolio being too investment driven and the company portfolio being concentrated on the Finnish market.
Since spring 2024, we have determinedly implemented our updated strategy and the short-term 'Back to Growth’ -Plan. The cost savings have realized in accordance with the goals set in the program. Trade working capital has not decreased in line with our goals in the previous quarters, although we have successfully reduced inventory levels by nearly EUR 10 million since summer 2023.
Despite recent challenges, we remain confident in our business model and strategy and in our ability to steer the company towards better times. Despite the challenges in the operating environment, the returns from our acquisitions made since autumn 2020 are at a reasonable level of approximately 15%, and the Group companies are progressing well in building future earnings growth. Supported by the implemented cost reductions and the steps we have taken to develop the companies' strategies, the Group is well positioned for a significant earnings improvement as market conditions improve.
Profitability secured successfully in the third quarter
Despite the challenging overall situation, we are pleased with how we have managed to secure the company's profitability over the last two quarters while facing a significant decline in turnover.
In the third quarter, the company’s net sales were 31% below the previous year. However, operational EBIT, supported by cost savings, was at a reasonable level of EUR 1.8 million (6.2% of net sales). Fixed costs decreased by EUR 1.2 million from the previous year and EUR 0.9 million from the previous quarter. Instead of previously communicated annual savings of at least EUR 1 million, we are achieving annual fixed cost savings of over EUR 2 million. The company’s profitability was also supported by a strong gross margin - the gross margin ratio increased from 27% last year to 32%.
In the third quarter, trade working capital increased by approximately 0.8 million euros and operational cash flow was at a level of EUR 0.7 million. Cash flow was weaker than our target, due to the increase in trade working capital and decreased profits. Return on capital employed (ROCE) decreased to 7.9 % and return on trade working capital (ROTWC) decreased from 28% to 24%.
Reasonable earnings outlook
The market situation, which remained challenging in the third quarter, showed signs of a pick-up in September, and the order intake of Signal Solutions Nordic and Milcon in particular was strong. Our companies’ orderbooks rose from the level at the end of the second quarter back to the level of the first quarter of 2024. The deliveries of concrete industry machinery to Construction Logistics Sweden AB, which we won earlier in the spring, will, contrary to our previous estimates, be postponed to the first half of 2025, and thus, also the earnings improvement of our Putzmeister businesses will be postponed to 2025.
Briefing for investors, analysts and media
A webcast where CEO Kari Nerg and CFO Jesse Petäjä present the Financial Statements Bulletin will be held today, October 31, 2024, at 11:00 EET. 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/q3-2024.
The event will be recorded and the recording will be available after the event at: www.boreo.com/investors.
Vantaa, October 31, 2024
BOREO PLC
Board of Directors
Additional information:
Kari Nerg
CEO
tel +358 44 341 8514
Jesse Petäjä
CFO
tel +358 40 706 9450
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 the 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.