Harju Elekter Group financial results, 1-6/2023

Harju Elekter Group continued to implement the new strategic plan at the desired level and showed a strong growth trend in the second quarter of 2023. Last quarter, we achieved a record turnover and operating profit. Successful price negotiations in framework procurements, as well as with other contractors helped to secure a strong result. In addition, we have introduced new pricing models to better mitigate the risks of changing input prices. At the same time, supply chains for the production of electrical equipment have improved, and the prices of materials and components have stabilised at higher price levels. The Group continues to improve efficiency to increase profitability.

Revenue and financial results

As a result of successful sales and production activities, the revenue in the reporting quarter was 35.4% more than a year earlier, 56.8 million euros. Revenue for the six months increased by 28.8% compared to the comparable period, reaching 102.0 (2022 6M: 79.2) million euros. The Group achieved increased sales of low-voltage switchgears, frequency converters, and e-houses. Additionally, larger projects that involved energy-saving solutions for the modernisation and construction of low-carbon ships were successfully completed.

EUR’000   Q2 Q2 +/- 6 M 6 M +/-
    2023 2022   2023 2022  
Revenue   56,762 41,914 35.4% 102,030 79,235 28.8%
Gross profit   6,611 963 586.5% 11,996 3,949 203.8%
EBITDA   3,243 -1,953 266.1% 5,625 -2,022 378.2%
Operating profit/loss (-) (EBIT)   2,168 -3,048 171.1% 3,477 -4,174 183.3%
Profit/loss (-) for the period   884 -3,197 127.7% 1,633 -4,491 136.4%
Incl. attributable to owners of the parent company   982 -3,209 130.6% 1,763 -4,517 139.0%
Earnings per share (EPS) (euros)   0.05 -0.18 127.8% 0.10 -0.25 140.0%

Operating expenses for the reporting quarter totaled 54.2 (2022 Q2: 45.2), and for the first half of the year were 98.0 (2022 6M: 83.6) million euros. The majority of the increase in operating expenses was caused by the increase in the costs of sales, 22.5% year-on-year and 19.6% in six months. The growth of the costs of sales was significantly lower than the growth rate of revenue in both periods, by 12.9 percentage points in the quarter comparison and 9.2 percentage points in the half year comparison.

In relation to comparable periods, both distribution and administrative costs were reduced by optimising costs. Distribution costs in the reporting quarter were 1.3 (2022 Q2: 1.5) and administration expenses were 2.7 (2022 Q2: 2.8) million euros. The total distribution costs for the first half of the year were 2.7 (2022 6M: 2.9) and administration expenses were 5.3 (2022 6M: 5.4) million euros.

Labour costs also increased in the comparison of quarters and half-years, being 10.7 (2022 Q2: 9.1) and 20.2 (2022 6M: 17.9) million euros, respectively. The majority of the increase in labour costs originates from staff growth, and the growth in average wages was influenced by wage pressure from the overall economy.

The gross profit for the reporting quarter was 6,611 (2022 Q2: 963) thousand euros and the gross margin was 11.6% (2022 Q2: 2.3%). Operating profit (EBIT) was 2,168 (2022 Q2: operating loss -3,048) thousand euros. The business profitability of the second quarter was 3.8% (2022 Q2: -7.3%). The net profit for the reporting quarter was 884 (2022 Q2: net loss -3,197) thousand euros, of which the share of the owners of the parent company was 982 (2022 Q2: -3,209) thousand euros. Net profit per share in the second quarter was 0.05 (2022 Q2: net loss per share -0.18) euros.

The gross profit for the first half of the year was 11,996 (2022 6M: 3,949) thousand euros and the gross margin was 11.8% (2022 6M: 5.0%). During the six months, operating profit (EBIT) was 3,477 (2022 6M: operating loss -4,174) and net profit 1,633 (2022 6M: net loss -4,491) thousand euros. Net profit per share was 0.10 (2022 6M: net loss per share -0.25) euros.

Core business and markets

During the reporting quarter, the Group's core activity - production - accounted for 95.1% of its revenue. The revenue of the production segment increased by 44.3% in the reporting quarter and 37.7% compared to six months, being 54.0 and 96.6 million euros, respectively.

In the second quarter, 5.6 (2022 Q2: 6.9) million euros were earned from Estonia, which was 18.8% less than a year earlier. Compared to six months, the revenue also decreased by 23.5%, to 10.5 million euros. The decrease in revenue in both periods is mostly related to the termination of the retail and project-based sale of electrical products in Estonia.

Compared to both periods, the revenue of the Finnish market was 11% more than a year earlier, amounting to 24.5 in the quarter and 43.1 million euros in the first half of the year. The majority of the increase in revenue came from the sale of automation equipment and low-voltage switchgears to key customers and from the growth of orders for car heating and charging equipment. During the reporting quarter, 43.2% (2022 Q2: 52.6%) of Harju Elekter products and services were sold to the Group's largest market.

The revenue of the Swedish market increased due to the rise in the sale of substations and the growth of project business, being 9.1 (2022 Q2: 3.5) in the reporting quarter and 15.6 (2022 6M: 9.3) million in the half-year. Swedish market accounted for 16.1% (2022 Q2: 8.3%) of the revenue of the reporting quarter.

Sales to the Norwegian market in the second quarter multiplied, achieving the largest sales growth across all markets. Several long-term projects were realised for key customers, allowing revenue to be earned in the amount of 11.5 (2022 Q2: 2.9) million euros in the reporting quarter and 15.5 (2022 6M: 7.4) million euros in the half-year. The Norwegian market accounted for 20.2% (2022 Q2: 6.9%) of the revenue of the reporting quarter.

Investments

During the reporting period, the Group invested a total of 2.6 (2022 6M: 2.2) million euros in non-current assets, incl 2.1 (2022 6M: 1.2) in investment properties, 0.4 (2022 6M: 0.7) in property, plant, and equipment and 0.1 (2022 6M: 0.3) million euros in intangible assets. Most of the investments during the reporting period were made in the construction of the production building to be rented out to Reimax Electronics OÜ in the Allika Industrial Park, scheduled to be completed by the end of the year. In addition, investments were made in other real estate objects, production technology equipment, and production and process management systems.

The value of the Group's non-current financial investments totalled 32.6 (31.12.22: 23.7) million euros as of the reporting date. Due to the revaluation of financial assets performed in the reporting quarter, the estimated fair value of OÜ Skeleton Technologies Group's investment increased by 8.8 million euros to 30.6 million euros.

Share

The company's share price on the last trading day of the reporting quarter on the Nasdaq Tallinn Stock Exchange closed at 5.0 euros. As of 30 June 2023, AS Harju Elekter Group had 11,174 shareholders. The number of shareholders decreased during the reporting quarter by 58 members.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION        
Unaudited        
EUR '000 30.06.2023 31.12.2022 30.06.2022  
ASSETS        
Current assets        
Cash and cash equivalents 2,339 9,152 629  
Trade and other receivables 38,447 31,612 31,134  
Prepayments 2,143 1,126 1,729  
Inventories 46,747 37,068 38,185  
Total current assets 89,676 78,958 71,677  
Non-current assets        
Deferred income tax assets 985 1,008 762  
Non-current financial investments 32,593 23,731 23,596  
Investment properties 26,314 24,756 24,647  
Property, plant, and equipment 33,919 35,740 25,794  
Intangible assets 7,267 7,244 7,711  
Total non-current assets 101,078 92,479 82,510  
TOTAL ASSETS 190,754 171,437 154,187  
LIABILITIES AND EQUITY        
Liabilities        
Borrowings 20,768 24,385 20,398  
Prepayments from customers 18,769 16,827 8,558  
Trade and other payables 32,034 24,502 27,615  
Tax liabilities 4,219 3,478 3,525  
Current provisions 1,950 2,103 551  
Total current liabilities 77,770 71,295 60,647  
Borrowings 23,780 20,732 14,158  
Other non-current liabilities 0 0 33  
Total non-current liabilities 23,780 20,732 14,191  
TOTAL LIABILITIES 101,550 92,027 74,838  
Equity        
Share capital 11,523 11,523 11,352  
Share premium 2,509 2,509 1,601  
Reserves 26,843 17,768 17,913  
Retained earnings 48,620 47,771 48,595  
Total equity attributable to the owners of the parent company 89,495 79,571 79,461  
Non-controlling interests -291 -161 -112  
Total equity 89,204 79,410 79,349  
TOTAL LIABILITIES AND EQUITY 190,754 171,437 154,187  
CONSOLIDATED STATEMENT OF PROFIT AND LOSS                
Unaudited                
                 
EUR '000 Q2 Q2 6M 6M        
  2023 2022 2023 2022        
Revenue 56,762 41,914 102,030 79,235        
Cost of sales -50,151 -40,951 -90,034 -75,286        
Gross profit 6,611 963 11,996 3,949        
Distribution costs -1,313 -1,515 -2,668 -2,866        
Administrative expenses -2,711 -2,764 -5,291 -5,429        
Other income 181 322 199 378        
Other expenses -600 -54 -759 -206        
Operating profit/loss (-) 2,168 -3,048 3,477 -4,174        
Finance income    -7 34 68 74        
Finance costs -1,021 -111 -1,570 -230        
Profit/loss (-) before tax 1,140 -3,125 1,975 -4,330        
Income tax -256 -72 -342 -161        
Profit/loss (-) for the period 884 -3,197 1,633 -4,491        
Profit /loss (-) attributable to:                
     Owners of the parent company 982 -3,209 1,763 -4,517        
     Non-controlling interests -98 12 -130 26        
Earnings per share                
    Basic earnings per share (euros) 0.05 -0.18 0.10 -0.25        
    Diluted earnings per share (euros) 0.05 -0.18 0.10 -0.25        
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME            
Unaudited            
             
EUR '000 Q2 Q2 6M 6M    
  2023 2022 2023 2022    
Profit/loss (-) for the period 884 -3,197 1,633 -4,491    
Other comprehensive income (loss)            
Items that may be reclassified to profit or loss            
    Impact of exchange rate changes of a foreign subsidiaries 164 -86 123 -65    
Items that will not be reclassified to profit or loss            
    Gain on sales of financial assets 0 169 0 320    
    Net gain/loss (-) on revaluation of financial assets 8,830 -336 8,866 -858    
Total comprehensive income (loss) for the period 8,994 -253 8,989 -603    
Other comprehensive income (loss) 9,878 -3,450 10,622 -5,094    
Total comprehensive income (loss) attributable to:            
     Owners of the Company 9,976 -3,462 10,752 -5,120    
     Non-controlling interests -32 12 -130 26    
             

Priit TreialCFO and Member of the Management Board+372 674 7400

 

 

Attachment

  • HEG Interim Report Q2 2023
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