Purmo Group’s half-year financial report January-June 2024: H1 adjusted EBITDA margin improved despite continued weak market
Purmo Group Plc | Stock Exchange Release | July 17, 2024 at 08:15:00 EEST
April–June 2024
• Net sales decreased by 5 per cent to EUR 171.5 million (180.3). The organic1 decline in net sales was 4 per cent.
• Net sales for the Climate Product & Systems division decreased by 5 per cent to EUR 137.8 million (144.7) and net sales for the Climate Solutions division decreased by 5 per cent to EUR 34.1 million (35.8).
• Adjusted EBITDA decreased by 12 per cent to EUR 18.7 million (21.2).
• Adjusted EBITDA margin decreased to 10.9 per cent (11.8) driven by lower volumes, temporary inefficiencies in operations and investments in the transformation of Purmo Group during the quarter.
• EBIT decreased to EUR 5.9 million (9.0), which included EUR -5.6 million (-4.2) of comparability adjustments.
• Cash flow from operating activities decreased to EUR 5.6 million (8.1).
• Accelerate PG programme’s adjusted EBITDA run-rate improvements amounted to EUR 42.3 million (EUR 34.1 million at the end of Q1 2024), of which periodic impact for the second quarter was EUR 5.7 million (EUR 3.4 million in Q2 2023) compared to the previous year.
January–June 2024
• Net sales decreased by 8 per cent to EUR 359.4 million (392.1). The organic1 decline in net sales was 8 per cent.
• Net sales for the Climate Product & Systems division decreased by 7 per cent to EUR 291.1 million (314.0) and net sales for the Climate Solutions division decreased by 12 per cent to EUR 68.8 million (78.3).
• Adjusted EBITDA decreased by 5 per cent to EUR 45.3 million (47.7).
• Adjusted EBITDA margin increased to 12.6 per cent (12.2).
• EBIT was EUR 23.7 million (24.0), which was burdened by EUR -6.9 million (-7.6) of comparability adjustments mainly related to the Accelerate PG programme.
• Cash flow from operating activities increased to EUR 10.4 million (6.8).
• Adjusted operating cash flow (last 12 months) improved by 20 per cent to EUR 81.2 million (67.8).
¹ Excluding currency effects and impacts from acquisitions and divestments.
The tender offers
• On 14 June 2024, Project Grand Bidco (UK) Limited announced that it had improved offer prices and lowered the acceptance threshold of its tender offer. In addition, the Purmo board maintained its recommendation. The holders of C Shares, and F Shares would be offered a cash consideration of EUR 11.15 for each such C Share or F Share validly tendered in the Improved Tender Offer and the holders of F Shares that are ineligible for conversion into C Shares, would be offered a cash consideration of EUR 6.75 for each such F Share validly tendered in the Improved Tender Offer.
• On 15 July 2024, Purmo Group announced that Haier Europe Appliances Holding B.V. has announced a Competing Voluntary Public Cash Tender Offer for all Shares in Purmo Group Plc at a price of EUR 13.68 per share for each Class C Share and each Class F Share eligible for conversion into a Class C Share validly tendered in the Tender Offer and at a price of EUR 8.28 per share for each Class F Share ineligible for conversion into a Class C Share validly tendered in the Tender Offer.
• On 15 July 2024, the Purmo Board noted, for the avoidance of doubt, that its recommendation issued on May 10, 2024 (as supplemented on June 19, 2024) for shareholders to accept the Grand Tender Offer on its improved terms remains upheld.
• On 16 July 2024, Project Grand Bidco (UK) Limited announced that it waives the remaining regulatory approval condition in its tender offer and confirms it will not increase its offer prices. The Board of Directors of Purmo Group Plc noted the announcement and reiterated that it continues to investigate shareholder support for the competing offer announced on July 15, 2024 by Haier Europe Appliances Holding B.V.
Financial guidance 2024
Adjusted EBITDA in 2024 is expected to be on a similar or higher level than in 2023 (EUR 92.3 million).
Wholesalers’ stock levels have stabilised, and the lower interest rates support the expectations of a gradual market activity improvement. Strong margin management actions provide confidence in the guidance for the Group. However, increased geopolitical risks and high overall uncertainties can have an impact on Purmo Group’s core markets.
The strategy acceleration programme, Accelerate PG, is performing ahead of plan and further underpins Purmo Group’s outlook for 2024. The cumulative targeted adjusted EBITDA run-rate improvements of the programme will be EUR 50.0 million, which are expected to be reached by the end of 2024. The programme also targets cumulative net working capital improvements of EUR 45.0 million by the end of 2024.
Key figures
| EUR million | 4-6/2024 | 4-6/2023 | Change, % | 1-6/2024 | 1-6/2023 | Change, % | 2023 | |
| Net sales | 171.5 | 180.3 -5% | 359.4 | 392.1 | -8% | 743.2 | ||
| Adjusted EBITDA¹ | 18.7 | 21.2 | -12% | 45.3 | 47.7 | -5% | 92.3 | |
| Adjusted EBITDA margin, %¹ | 10.9% | 11.8% | 12.6% | 12.2% | 12.4% | |||
| Adjusted EBITA¹ | 12.5 | 14.1 | -12% | 32.7 | 33.5 | -2% | 66.3 | |
| Adjusted EBITA margin, %¹ | 7.3% | 7.8% | 9.1% | 8.6% | 8.9% | |||
| EBIT | 5.9 | 9.0 | -35% | 23.7 | 24.0 | -1% | 9.7 | |
| EBIT margin, % | 3.4% | 5.0% | 6.6% | 6.1% | 1.3% | |||
| Profit for the period | -0.8 | 2.9 | 8.7 | 9.6 | -10% | -9.3 | ||
| Adjusted profit for the period¹ ³ | 3.2 | 6.1 | -47% | 13.7 | 15.7 | -13% | 32.2 | |
| Earnings per share, basic, EUR | -0.03 | 0.04 | 0.17 | 0.19 | -12% | -0.32 | ||
| Adjusted earnings per share, basic, EUR¹ ³ | 0.07 | 0.12 | -44% | 0.29 | 0.34 | -14% | 0.68 | |
| Cash flow from operating activities | 5.6 | 8.1 | -30% | 10.4 | 6.8 | 52% | 40.4 | |
| Adjusted operating cash flow, last 12 months¹ ² | 81.2 | 67.8 | 20% | 75.1 | ||||
| Cash conversion¹ ² | 90.3% | 81.2% | 81.4% | |||||
| Operating capital employed¹ | 301.5 | 321.3 | -6% | 294.7 | ||||
| Return on operating capital employed, %¹ | 3.1% | 10.3% | 2.9% | |||||
| Net debt¹ | 236.8 | 230.7 | 3% | 219.6 | ||||
| Net debt / Adjusted EBITDA¹ | 2.63 | 2.76 | -5% | 2.38 | ||||
¹ Purmo Group presents certain measures of financial performance, financial position and cash flows, which are alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority (‘ESMA’). For the detailed definitions and reconciliation of alternative performance measures see page 46 in the January-June 2024 half-year financial report.
² Change in net working capital includes assets held for sale. M&A and comparability adjustments totalled EUR 6.3 (7.9) million.
³ Comparative figures for Q2 2023 have been restated due to change in calculation of the key figure, see page 47 in the January-June 2024 half-year financial report.
CEO’s review
During the first half of the year, Purmo Group delivered an increase in adjusted EBITDA margin despite weak market conditions. This was thanks to strong performance in the Accelerate PG programme as well as a strong, continued focus on margin management by our dedicated teams all around Europe and beyond. Volumes were still low in the challenging market, although signs of optimism were visible in Eastern Europe where demand for our radiators increased.
We work constantly to improve and develop our production. As part of our transition, we have shifted our production in Europe to countries with lower production costs, such as China. This has caused temporary inefficiencies in operations during the quarter, which coupled with investments in the transformation of Purmo Group, led to a decline in earnings during the second quarter.
We acknowledge there is interest in Purmo Group, which is demonstrated by the bids we have received from Grand Bidco UK Ltd, as well as Haier Europe Appliances B.V. Management has together with the appointed Board Committee spent time responding to the offers through intensive due diligence preparatory work.
Our strategy for complete solutions remains strong: it is a response to the increasing demand for more energy-efficient buildings and a greener future.
The Climate Products & Systems division was impacted by weak markets, and the Climate Solutions division’s earnings were lower compared to the strong period last year
The demand environment remained weak in our two business divisions in the second quarter. In the Climate Products & Systems division, volumes remained weak, but some early signs of recovery were seen in a few markets. As a whole, the project volumes were low, which led to a net sales decline of 5%. Despite the tough market, the division succeeded well in price and cost management. The adjusted EBITDA was EUR 16.2 million for the quarter, a decrease of 5% from last year. The adjusted EBITDA margin remained roughly on the same level compared to the previous year.
In the Climate Solutions division, net sales declined by 5% in the quarter due to lower demand. Earnings for the division were impacted by low market demand and led the adjusted EBITDA to EUR 5.5 million, a decline of 17% compared to the previous year. Adjusted EBITDA margin decreased by 2.4 percentage points compared to last year.
Accelerate PG programme ahead of plan, growth initiatives kicked off
Our Accelerate PG programme continued to deliver strong run-rate benefits in the second quarter. The programme delivered EUR 5.7 periodic improvements in the quarter compared to the previous year. The cumulative adjusted EBITDA run-rate improvements were EUR 42.3 million. As part of the programme initiatives, we completed the negotiations at the Hull plant in the United Kingdom. The production will be transferred to Gateshead in the third quarter of 2024. Besides cost savings, the growth phase of the programme has started, with various growth initiatives being kicked off during the quarter. The target for the growth phase is to achieve approximately EUR 15.0 million of incremental adjusted EBITDA run-rate improvements by the end of 2025.
Science Based Targets validated
In the second quarter, we received validation from the Science Based Targets organisation for our near-term and long-term targets, which we are very proud of. In the near term, we are committed to reducing absolute Scope 1 and 2 GHG emissions by 54.6% by 2033 from 2022. For the long-term, we will reduce absolute Scope 1 and 2 GHG emissions by 90% by 2050 from 2022. The validation of the targets is a strong achievement for our organisation and worth celebrating.
Full-year guidance 2024 unchanged
Although growth was not yet visible in the second quarter of 2024, we saw slight optimism in a few markets. We achieved good results in the Accelerate PG programme, rolling out several growth initiatives for the future. We keep our guidance unchanged for 2024. The adjusted EBITDA in 2024 is expected to be on a similar or higher level than in 2023 (EUR 92.3 million).
News conference and webcast for analysts, investors and media
The publication will be followed at 10.00 a.m. EEST by a live webcast and a teleconference for analysts, investors and media representatives. At the event, CEO John Peter Leesi and CFO Jan-Elof Cavander will present the results and answer questions in English.
• Webcast: https://purmogroup.videosync.fi/q2-2024
• Teleconference lines: https://palvelu.flik.fi/teleconference/?id=50048527
Participants should register through the above link to ask questions through the conference call lines. After registering they will receive a teleconference number and a code to join the call. Participants will be asked to press number 5 to join the queue for questions.
A recording of the event will be available at https://investors.purmogroup.com/ir-material/ shortly after the event has ended.
Purmo Group Plc
Further information:
Jan-Elof Cavander, Chief Financial Officer, Purmo Group Plc
Katariina Kataja, Head of Investor Relations, Purmo Group Plc, Tel. +358 40 527 1427
Distribution:
Nasdaq Helsinki Ltd
Principal media
investors.purmogroup.com
About Purmo Group:
Purmo Group is at the centre of the global sustainability journey by offering full solutions and sustainable ways of heating and cooling homes to mitigate global warming. We provide complete heating and cooling solutions to residential and non-residential buildings, including underfloor heating and cooling systems, a broad range of radiators, heat pumps, flow control and hydronic distribution systems, as well as smart products. Our mission is to be the global leader in sustainable indoor climate comfort solutions. Our approximately 2,950 employees operate in 23 countries, manufacturing and distributing top-quality products and solutions to our over 100,000 customers in more than 100 countries. Purmo Group’s shares are listed on Nasdaq Helsinki with the ticker symbol PURMO. More information: www.purmogroup.com.