Harvia’s Half-year financial review 1 January – 30 June 2023
Harvia Plc, Half-year financial review 10 August 2023 at 9.00 a.m. EEST
Harvia H1 2023: Solid profitability maintained, challenging market conditions continued to impact revenue
This release is a summary of Harvia Plc’s Half-year financial review January–June 2023. The complete report is attached to this release as a pdf file. It is also available on Harvia’s website at https://harviagroup.com/.
Highlights of the review period
April–June 2023:
- Revenue decreased by 22.3% to EUR 35.8 million (46.0). At comparable exchange rates, revenue decreased by 21.3% to EUR 36.2 million. Organic revenue growth was -17.8%.
- Operating profit was EUR 7.8 million (8.7), making up 21.9% (19.0) of the revenue.
- Adjusted operating profit reached EUR 8.0 million (8.8), making up 22.3% (19.1) of the revenue. At comparable exchange rates, the adjusted operating profit was EUR 8.2 million (22.6% of the revenue).
- Operating free cash flow amounted to EUR 9.1 million (2.1) and cash conversion was 96.1% (19.8).
January–June 2023:
- Revenue decreased by 20.3% to EUR 77.2 million (96.8). At comparable exchange rates, revenue decreased by 20.3% to EUR 77.2 million. Organic revenue growth was -17.0%.
- Operating profit was EUR 17.0 million (20.8), making up 22.1% (21.5) of the revenue.
- Adjusted operating profit reached EUR 17.3 million (20.9), making up 22.4% (21.6) of the revenue. At comparable exchange rates, the adjusted operating profit was EUR 17.4 million (22.5% of the revenue).
- Operating free cash flow amounted to EUR 20.8 million (9.1) and cash conversion was 102.2% (37.5). The change in net working capital increased the operating free cash flow and cash conversion.
- Net debt amounted to EUR 45.8 million (47.2) and leverage, calculated as net debt divided by 12 months’ adjusted EBITDA, was 1.2 (0.9).
- Equity ratio was 46.3% (44.4).
- Earnings per share were EUR 0.62 (0.89).
- On 28 March 2023, the Board of Directors of Harvia plc appointed Matias Järnefelt as Harvia’s CEO. Järnefelt started in his position on 1 June 2023.
Key figures
| EUR million | 4−6/ 2023 | 4−6/ 2022 | Change | 1−6/ 2023 | 1−6/ 2022 | Change | 1−12/ 2022 |
| Revenue | 35.8 | 46.0 | -22.3% | 77.2 | 96.8 | -20.3% | 172.4 |
| EBITDA | 9.4 | 10.4 | -9.5% | 20.1 | 24.1 | -16.4% | 41.2 |
| % of revenue | 26.2% | 22.5% | 26.1% | 24.9% | 23.9% | ||
| Items affecting comparability * | 0.1 | 0.1 | 109.6% | 0.2 | 0.1 | 217.4% | 1.8 |
| Adjusted EBITDA ** | 9.5 | 10.4 | -8.8% | 20.4 | 24.1 | -15.7% | 42.9 |
| % of revenue | 26.6% | 22.7% | 26.4% | 24.9% | 24.9% | ||
| Operating profit | 7.8 | 8.7 | -10.2% | 17.0 | 20.8 | -18.1% | 34.7 |
| % of revenue | 21.9% | 19.0% | 22.1% | 21.5% | 20.1 % | ||
| Adjusted operating profit ** | 8.0 | 8.8 | -9.3% | 17.3 | 20.9 | -17.4% | 36.5 |
| % of revenue | 22.3 % | 19.1 % | 22.4% | 21.6% | 21.1% | ||
| Basic EPS (EUR) | 0.28 | 0.40 | -28.4% | 0.62 | 0.89 | -30.6% | 1.45 |
| Operating free cash flow | 9.1 | 2.1 | 341.7% | 20.8 | 9.1 | 129.7% | 34.0 |
| Cash conversion | 96.1% | 19.8% | 102.2% | 37.5% | 79.1% | ||
| Investments in tangible and intangible assets | -0.9 | -1.2 | -25.8% | -1.2 | -2.1 | -45.0% | -3.6 |
| Net debt | 45.8 | 47.2 | -2.9% | 45.8 | 47.2 | -2.9% | 54.5 |
| Leverage | 1.2 | 0.9 | 1.2 | 0.9 | 1.3 | ||
| Net working capital | 36.5 | 55.8 | -34.7% | 36.5 | 55.8 | -34.7% | 45.3 |
| Adjusted return on capital employed (ROCE) | 47.7% | 80.9% | 47.7% | 80.9% | 54.5% | ||
| Equity ratio | 46.3% | 44.4% | 46.3% | 44.4% | 47.3% | ||
| Number of employees at end of period | 619 | 821 | -24.6% | 619 | 821 | -24.6% | 633 |
* Consists of items outside the ordinary course of business, relating to the Group’s strategic development projects, acquisitions, business divestments, restructuring and loss on sale of fixed assets, and affecting comparability.
** Adjusted by items affecting comparability.
Financial targets and outlook
The company has set long-term targets related to growth, profitability and leverage. Harvia targets an average annual revenue growth of more than 5%, an adjusted operating profit margin exceeding 20% and a net debt/adjusted EBITDA between 1.5x−2.5x in the long term. The future impacts of changes in IFRS reporting standards have been excluded in the net debt/adjusted EBITDA ratio target.
Harvia does not publish a short-term outlook.
Harvia’s dividend policy is to pay a regularly increasing dividend with a bi-annual payout.
Matias Järnefelt, CEO:
In the second quarter of 2023, Harvia again showed great ability to maintain solid profitability and high cash flow in challenging and mixed market conditions. Our sales performance continued to be weakened by low consumer confidence, elevated inflation and high interest rates in several key markets.
In the second quarter of 2023, our revenue reached EUR 35.8 million, showing a decline of 22.3% compared to last year.
The market conditions and our sales performance continued to differ significantly between market areas also in the second quarter. In Europe, low consumer confidence, elevated inflation, high interest rates and the resulting caution in discretionary spending had a negative impact on our sales especially in the DACH region, and there was decline also in Finland and Scandinavia. The impact was felt across product categories, even though the sales of steam generators and heater stones showed better resilience. Additionally, we have seen some signs of sauna and spa market seasonality moving towards the pre-pandemic pattern where the demand is slightly lower during summer and higher in the first and last quarter of the year.
In North America, Harvia delivered solid growth as the overall market continued on a growth trajectory. The strong North American sales performance supported the entire Group’s sauna sales. The demand in Other markets was on a healthy level, but compared to second quarter last year, our sales result there was negatively affected by the complete exit from Russia, as well as lower project invoicing especially in the Middle East and Africa. However, our work to accelerate sales in many Asian markets, including increasing our footprint in Japan through a joint venture, progressed well and according to our plans.
The second quarter’s adjusted operating profit reached EUR 8.0 million, decreasing 9.3% from last year and amounting to 22.3% of revenue. Once again, we succeeded well in adjusting our operations, costs, and pricing to the prevailing market environment without compromising our service level. While inflation remained elevated in the second quarter, we witnessed some easing of cost pressure in certain key materials and components. Our actions in net working capital management together with a moderate investment level contributed positively to Harvia’s operating free cash flow, which was strong at EUR 9.1 million in the second quarter. All this reflects the excellent work done by team Harvia and our partners, for which I would like to express my thanks and appreciation.
Going forward, and in addition to all current actions, we will continue to increase our growth efforts especially in the strong North American market, as well as in Asia and other emerging markets. While the market conditions in the DACH region and more widely in Europe do not yet show clear signs of recovery, there are areas where we can act to further strengthen our position. In addition, we will continue to monitor closely the developments in market demand and cost levels and will adjust our pricing, operations, and cost structure in an agile manner also in the future.
We will remain fully focused on Harvia’s strategic cornerstones of geographical expansion, increasing the average purchase value and systematic improvement of productivity. Our long-term financial targets are unchanged. We will continue to seek organic growth through our sales activities and progress in our innovation pipeline. We will continue actively identifying and evaluating strategic opportunities on the M&A front. Looking to the future, I feel confident that Harvia will continue to strengthen its position as the number one player in the attractive sauna and spa industry.
Press conference on financial results
Harvia will hold a webcast for analysts, investors and media on 10 August 2023 at 11:00 a.m. EEST. The conference will be held in English. Harvia’s CEO Matias Järnefelt and CFO Ari Vesterinen will host the event. The webcast can be followed at https://harvia.videosync.fi/2023-08-10-q2results.
A recording of the webcast will be available later on the company’s website https://harviagroup.com/investor-relations/.
For more information, please contact:
Matias Järnefelt, CEO, tel. +358 40 5056 080
Ari Vesterinen, CFO, tel. +358 40 5050 440
Harvia is one of the leading companies operating in the sauna and spa market globally, as measured by revenue. Harvia’s brands and product portfolio are well known in the market, and the company’s comprehensive product portfolio strives to meet the needs of the international sauna and spa market of both private and professional customers.
Harvia’s revenue totaled EUR 172.4 million in 2022. Harvia Group employs more than 600 professionals in Finland, China and Hong Kong, Romania, Austria, United States, Germany and Estonia. The company is headquartered in Muurame, Finland, adjacent to its largest sauna and sauna component manufacturing facility.
Read more: https://harviagroup.com
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