Market announcement

Title

Financial results, 1-6/2014

Message

The Group’s six months sales revenue was 20.8 million euros and in the accounting quarter 11.1 million euros, which was 15% higher comparing to the Q1 2014. Most of the operating profit in the amount of 0.4 million euros earned in the reporting quarter. Two important events took place in Q2: purchasing of the Finland’s largest substations manufacturer Finnkumu Oy and in order to promptly finance the purchase of the Finnish subsidiary also 200,000 shares of PKC Group Oyj at an extraordinarily high price level were sold. Overall, the consolidated net profit of the H1 2014 increased to 6.4 million euros and to 6.0 million euros in Q2 2014.

                            Change April - June Change January - June Year 
(thousand euros)               %     2014 2013     %       2014 2013   2013 
Revenue                       -15.1 11,092 13,060 -15.1 20,753 24,450 48,288 
Gross profit                  -18.0  1,922  2,344 -11.1  3,616  4,066  8,458 
EBITDA                        -22.6    736    951 -21.9  1,177  1,507  3,269 
EBIT                          -37.5    362    579 -45.5    418    768  1,743 
Profit for the period         239.8  5,954  1,752 156.1  6,325  2,470  5,173 
incl attributed to Owners of 
the Company                   250.1  5,970  1,705 164.7  6,361  2,403  5,162 

Business at the beginning of this year has started more slowly than in previous years, but there were some improvements in Q2. Revenue increased in the reporting quarter compared to the previous quarter, 15% or 1.4 million euros, remaining nonetheless 15% below the comparable periods. 89% of sales revenue was earned from the Production segment, and Real Estate together with Unallocated Activities contributed 11% of the consolidated sales volume. The Manufacturing segment is engaged in the manufacturing and sales of electricity distribution and control equipment and in related activities. The revenue from the sales of electrical equipment comprised 91% of the sales volume for Manufacturing and 81% of the consolidated revenue, down by more than 17% both in the reporting quarter and in H1 2014.

Decreased investments in the energy distribution sector in Estonia this year have resulted in a decrease in the sales volumes for medium voltage distribution equipment and substations. Sales on the Estonian market declined 27% in the reporting quarter and one-fifth in the first half of the year, decreasing the share of the Estonian market in the consolidated revenue to 34.6%. The Finnish export sector remains in recession, and once again we have to recognise the 10% drop in the sales volumes of the technology sector, compared to the first half of 2013. Sales from the Group’s Finnish company in this sector decreased 17.5% in the first half of the year. At the same time, the 6-months revenue for the Finnish company has increased 8%, due to the resale of other Group’s companies’ products. Revenue from the resale of products from the Group’s Estonian and Lithuanian companies made up 43% of the revenue for the Finnish company, increasing 2.3 times to 4.2 million euros, in the first six months. A considerable portion of the consolidated sales revenue, including the decline in the sales of electrical equipment, came from the Lithuanian segment, where revenue decreased by 41% against the comparable period, mainly due to a decrease in the sales from projects. In the first half of the year, sales on the Lithuanian market decreased 80%, generating just 1.8% (H1 2013: 7.3%) of the consolidated revenue. At the same time, companies in the Lithuanian segment have increased their sales volumes to foreign markets by more than 15%.

The revenue earned by the Group outside Estonia made up 65.4% in the first half of 2014, rising to 66.5% in the reporting quarter. Increasing the share of foreign markets has been, and also will be in the longer term, one of the strategic objectives for the managers of the Group. More than 86% revenue received from home markets of the Group’s companies. The tense situation in Ukraine has decreased deliveries by 0.5 million euros in the direction of Eastern Europe. Switzerland and Czech were added as new markets.

Operating expenses decreased 13.8% to 10.7 million euros in the reporting quarter and 14.1% to 20.3 million euros in the first half of the year, at a rate slightly below the sales revenue (15.1%). There was a decrease in operating expenses, with the cost of sales decreasing 14.4% to 9.2 million euros in Q2 and 15.9% to 17.1 million euros in the first six months. Since the cost of sales decreased at a pace that exceeded the sales revenue during the six months, the gross profit margin improved by 0.8 percentage points in comparison to the indicator for the comparable period.

In Q2 2014, the average 444 people worked in the Group ? on the average by 20 persons less than in the reference period. In the first half of the year, the average number of employees decreased by 21 against the comparable period, to 442. Although the adjustment in the salaries of the Group’s staff in 2013 resulted in a rise in fixed costs, the Group was able to respond promptly to the decrease in sales orders and implemented austerity measures. Labour costs decreased by 5.1% to 3.0 million euros and by 1.3% to 5.8 million euros, respectively. In the accounting quarter, employee wages and salaries totalled 2,162 (Q2 2013: 2,305) thousand euros and during the first 6 months 4,331 (H1 2013: 4,414) thousand euros. The average wages per employee per month amounted to 1,633 (H1 2013: 1,591) euros.

The Group’s operating profit in the reporting quarter was 362 (Q2 2013: 579) thousand euros and EBITDA 736 (Q2 2013: 951) thousand euros. Return of sales for the accounting quarter was 3.3% (Q2 2013: 4.4%) and return of sales before depreciation 6.6% being 0.7 per cent point lower compering to the same period figure a year before. The Group’s EBITDA in first half of the year decreased by 0.33 million euros to 1.18 million euros and EBIT by 0.35 million euros to 0.42 million euros. The decrease in operating profit was the result of the decreased proportion of value added products in the product portfolio. In H1, return of sales before depreciation was 5.7% (H1 2013: 6.2%) and return of sales for the accounting quarter was 2.0% (H1 2013: 3.1%).

In the reporting quarter, dividend income was 906 (Q2 2013: 948) thousand euros and also 200,000 PKC Group Oyj shares were sold. The financial income from selling the shares amounted to 4.6 million euros. In total, financial investments yielded a profit of 5.5 million euros both in the reporting quarter as well as in the first half of the year. In the comparable periods these figures were 0.9 million euros and 1.4 million euros respectively. In Q2, the Group consolidated from the associated company a profit of 491 (Q2 2013: 608) thousand euros and totally in H1 815 (H1 2013: 683) thousand euros.

The consolidated net profit of the quarter under review was 5.95 (Q2 2013: 1.75) million euros; the share of the owners of the Company was 5.97 (Q2 2013: 1.71) million euros. EPS in the Q2 was 0.34 (Q2 2013: 0.10) euros. Overall, the consolidated net profit of the H1 2014 was 6.33 million euros, being 2.6 times better. The share of the owners of the Company was 6.36 million euros. EPS in the H1 was 0.37 (H1 2013: 0.14) euros.

Andres Allikmäe
Managing director/ CEO
+372 674 7400

For more information: Internal report 1-6/2014

 

AS HARJU ELEKTER         
BALANCE SHEET, 30.06.2014         
Consolidated, unaudited         
          
          
Group         
EUR'000         
ASSETS                                                   30.06.14 31.12.13     
Cash and cash equivalents 3 252 4 102     
Available-for-sale financial assets 112 0     
Trade receivables and other receivables 7 912 5 699     
Prepayments 414 256     
Prepaid income tax 64 41     
Inventories 9 352 5 801     
TOTAL CURRENT ASSETS                     21 106 15 899     
Deferred income tax asset 7 7     
Investments in associates  4 413 3 598     
Other long-term financial investments 22 922 31 339     
Investment property 11 566 11 663     
Property, plant and equipment 8 184 8 129     
Intangible assets 3 774 436     
Total non-current assets 50 866 55 172     
TOTAL ASSETS                              71 972 71 071     
LIABILITIES AND OWNERS' EQUITY                  
Interest-bearing loans and borrowings 941 654     
Trade payables and other payables 8 547 4 437     
Tax liabilities   1 057 969     
Income tax liabilities 136 15     
Short-term provision 25 36     
TOTAL CURRENT LIABILITIES                 10 706 6 111     
NON-CURRENT LIABILITIES             1 139 1 141     
TOTAL LIABILITIES                         11 845 7 252     
Share capital                             12 180 12 180     
Share premium 240 240     
Restricted reserves                       23 167 31 424     
Retained earnings                         23 292 18 635     
TOTAL OWNERS' EQUITY                       58 879 62 479     
Non-controlling interests 1 248 1 340     
TOTAL EQUITY                       60 127 63 819     
TOT.LIABILIT.AND OWNERS' EQUITY      71 972 71 071     
          
          
INCOME STATEMENT,  1-6/2014         
Consolidated,unaudited         
          
EUR’000         
GROUP Q2 2014 Q2 2013 H1 2014 H1 2013 
          
NET SALES 11 092 13 060 20 753 24 450 
Cost of goods sold -9 170 -10 716 -17 137 -20 384 
Gross profit 1 922 2 344 3 616 4 066 
Marketing expenses -646 -704 -1 296 -1 304 
Administrative expenses -929 -1 045 -1 899 -1 984 
Other revenue 26 1 35 18 
Other expenses -11 -17 -38 -28 
Operating profit 362 579 418 768 
Finance income 5 531 955 5 548 1 417 
Finance costs -9 -15 -16 -23 
Income from subsidiaries 491 608 815 683 
Profit from normal operations 6 375 2 127 6 765 2 845 
Corporate Income tax -421 -375 -440 -375 
Profit after taxes, incl 5 954 1 752 6 325 2 470 
Net profit for the year 5 970 1 705 6 361 2 403 
Non-controlling interest -16 47 -36 67 
Basic earnings per share  (EUR) 0,34 0,1 0,37 0,14 
Diluted earnings per share  (EUR) 0,34 0,1 0,37 0,14 

Karin Padjus
FO
+372 674 7403