Solwers Oyj: Continuous growth driven by acquisitions

Solwers Plc Half-Year Financial Report 1.1. - 30.6.2024 (unaudited)

Solwers Plc, Company Release, August 30, 2024, at 8.30 a.m. EEST

This release is a summary of Solwers Plc's Half-Year Financial Report January-June 2024. The full financial statements bulletin is attached to this company release and available on the company's website at https://solwers.com/for-investors/reports-and-presentations/

The figures for the first half of the year (1 January-30 June 2024) are unaudited. The figures in brackets refer to the corresponding period in the preceding year and are of the same unit, unless otherwise stated.

January-June 2024 in brief

• Revenue was EUR 39,909 (33,194) thousand, growth of 20.2% vs previous year
• EBITA was EUR 3,259 (3,536) thousand, 8.2% (10.7) of revenue
• EBIT was EUR 1,952 (2,483) thousand, 4.9% (7.5) of the revenue
• Operating cash flow of EUR +1,125 (+985) thousand remained relatively stable. Financial position continued to be good
• Billing rate was 81.5% (81.7)
• Earnings per share (EPS) was EUR 0.07 (0.15)
• Headcount at the end of the reporting period was 690 (611)
• The implementation of the growth strategy continued by acquiring three operative companies in Sweden, one in Finland as well as one shareholding partnership in Finland
• Ownership in the subsidiaries was strengthened by redeeming minority holdings in two subsidiaries
• The Annual General Meeting decided to distribute dividends of EUR 0.064 (0.073) per share for the financial year 2023

Key figures

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CEO's Review

STEFAN NYSTRÖM:

The year 2024 so far has been eventful for Solwers, marked by acquisitions and initial preparations for a possible transfer to the main list of Nasdaq Helsinki. During 2024, we have already welcomed six new companies into the group and have several potential acquisition targets on our radar. This year we may well see a record-breaking number of acquisitions in Solwers' history. Our January-June revenue is nearing the milestone of 40 million euros, which corresponds to 20 per cent growth rate. Most of this is the result of acquisitions.

Evidently, the overall market uncertainty has persisted. The interest rates have decreased slower than expected, hence investment activity has not picked up as estimated at the beginning of the year. Companies that specialize in residential and office projects continue to face challenges, while infrastructure and industrial projects particularly in Northern Sweden perform better. From a geographical perspective, although we see bigger growth in Finland, the business climate is more favourable in Sweden. The relatively slower growth in Sweden can partly be attributed to the weak Swedish krona.

While the order backlog and billing rate have remained stable, Solwers' profitability KPIs have declined compared to the corresponding period last year. This is partly due to initial preparation costs related to a possible transfer to the main list of Nasdaq Helsinki. In addition, some recently acquired group companies are performing better than forecasted, which results in higher contingent consideration and decreases the reported profitability. Excluding these costs, EBITA exceeds last year's level. The performance has particularly improved in the second quarter of the year.

Despite the challenging phase in the economy, our vision extends further into the future in planning smart and sustainable societies. Our recent projects include OYS Future Hospital in Oulu, Finland where Solwers company Lukkaroinen Architects was responsible for the architecture and interior planning in alliance with two other agencies. The hospital area will have a total of 120,000 m2 and consists of modular buildings with standardized facilities enabling the widest possible range of uses to meet the needs of rapidly evolving hospital operations in the future. In Sweden, Dreem Architects is involved in the design of Future Backaplan, Sweden's largest building with recycled bricks located in Gothenburg. Once finished, Backaplan will offer housing, workplaces and recreation for approximately 20,000 people. The recycled bricks alone contribute to 210 tonnes less carbon dioxide. Together with other sustainable solutions, such as the partial use of wooden piles and low-carbon concrete, the goal for the entire project is to have at least 2,200 tonnes of lower CO[2] emissions. ELE Engineering, on the other hand, is responsible for the full secondary design of the construction project for the 130kV transformer station PT60 Flarken in northern Sweden. ELE Engineering will supply the electrical design to Koncar Engineering, which is the main contractor for Vattenfall Eldistribution. This project will increase the transmission capacity in the northern part of Sweden and is expected to be completed by the end of 2026. Another Sweden-based subsidiary of Solwers' Establish-Schening has been contracted to play a pivotal role in managing part of the Swedish-American clothing brand GANT's strategic relocation project during the autumn of 2024. The project will focus on ensuring a seamless transition to the new distribution center, which is essential for GANT's continued growth in the European market.

Looking ahead, we expect a moderate improvement in our business climate towards the end of the year. We have great projects in the pipeline and look forward to positive investment decisions for new projects. We continue to adjust capacity where needed but most importantly, our focus is firmly on enhancing sales across subsidiaries, leveraging the megatrends of urbanization and the green transition in Europe and self-sufficiency in energy production.

Market Outlook

In the short term, high inflation, high interest rates and construction costs lead to the weakening of purchasing power, willingness to invest in new projects and possibly postponing some. The market pick-up has been somewhat delayed in Finland as the interest rates have not come down at the pace generally anticipated at the beginning of the year. 

Residential and office construction continue to struggle. The impact is visible across the engineering and design sectors by increased price competition, particularly in public sector projects in case they have fewer or no quality requirements.

Solwers anticipates that the transition to fossil-free energy and industrial production continue to grow, particularly in the North of Sweden. A variety of new energy production alternatives, energy storage, power transmission grids and automation solutions will continue to increase the demand for engineering and project management services in these fields. To our view, also the infrastructure sector has a positive outlook.

Solwers' outlook for 2024 remains unchanged

Solwers' outlook for 2024 is reiterated in accordance with the Financial Statements Release published on March 11, 2024.

Solwers' business is supported by the megatrend of urbanization, the green transition in Europe, tightening regulation on biodiversity, self-sufficiency in energy production, and especially in Sweden the increased orders of the defence equipment industry which create new business opportunities.

In the ongoing year 2024 the acquisitions continue to support our existing business. We focus on areas where new production and investments are booming such as energy, automation, and power transmission.

Solwers has a good order backlog in the public sector and infrastructure projects and long assignments also in hospital and school design projects. The company has a wide client base and a diverse service portfolio - around 70 per cent are small, under EUR 10 000 projects. In addition, we continue to manage business risk by operating in multiple locations in at least two countries.

Solwers' business climate is expected to improve towards the end of 2024 with the general market pick-up.

Espoo, August 30, 2024 

Solwers Plc

Board of Directors

Certified Advisor: UB Corporate Finance Oy, ubcf@unitedbankers.fi

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Webcast: August 30, 2024, at 10.00 am EEST

Webcast for analysts, media and investors will be held today, August 30, 2024, at 10.00 am EEST. The webcast can be viewed live at https://solwers.videosync.fi/q2-2024