Boreo Plc, INTERIM REPORT JANUARY 1 −MARCH 31, 2022
May 05, 2022, at 9:00
Strong growth in net sales and operational EBIT continued
Net sales grew by 30% to EUR 37.8 million (2021: 29.0).
Operational EBIT increased by 22% to EUR 2.0 million (2021: 1.6).
EBIT was EUR 1.4 million (2021: 2.2). EBIT for the comparison period was significantly affected by a non-recurring EUR 0.8 million sales gain from the Espoo headquarters.
Free cash flow was EUR 0.9 million (2021: -0.1).
Operational EPS was EUR 0.48 (2021: 0.45).
EPS was EUR 0.30 (2021: 0.61).
In February, issuance of a EUR 20 million hybrid loan and a EUR 55 million credit facility with OP Corporate Bank Plc were announced.
The acquisitions of Pronius Oy, Infradex Oy and Vesterbacka Transport Oy were completed in March.
Financial guidance and business model
On March 4, 2021, Boreo announced its new strategy and strategic financial objectives for the strategy period 2021-2023. Boreo's business model is to own, acquire and develop business operations in Northern Europe. The main focus of the new announced strategy is acquisitions, operational efficiency and people & culture.
The company's long-term financial targets for the strategy period 2021–2023 are:
At least 20 % average annual net sales growth over the strategy period,
At least 8% operational EBIT at the end of the strategy period,
Net debt/operational EBIT 2-3x (excluding items affecting comparability, including acquired business activities as if they had been held for 12 months at the reporting date), and
Annually increasing dividend per share.
The above-mentioned strategic financial objectives serve as the company's financial guidelines. Due to the significant uncertainty arising from the crisis in Ukraine, the company currently assesses whether the crisis has an impact on its strategic financial objectives. In line with its guidance policy, the company does not give separate short-term financial guidance.
As of the Q1 2022 interim report, Boreo has changed the accounting principle of operational EBIT so that operational EBIT no longer takes into account the impact of the allocation of acquisition costs. The impact of the allocation of acquisition costs arise from the depreciation of fair value allocations at the time of acquisition based on IFRS during their useful life. The company sees that operational EBIT before allocation of acquisition costs better reflects the profitability of its operations. This change has an impact on operational EBIT and operational EPS. The figures for the comparison period have been adjusted to reflect the same principle in order to maintain comparability. Otherwise, the accounting principles of this review do not include any changes that materially affect comparability. The comparison figures in brackets refer to the corresponding period of the previous year, unless otherwise specified.
Group’s key figures
relative to net sales, %
Profit before taxes
Profit for the period
Free cash flow
Equity ratio, %
Interest-bearing net debt
Interest-bearing net debt relative to operational EBITDA of the previous 12 months*
Average number of personnel
Personnel at end of the period
Operational EPS, EUR**
Free cash flow per share, EUR
* Calculated in accordance with the calculation principles established with financiers. The formula for calculating the indicators is presented later in this report.
**The effect of the interest rate of the hybrid loan recorded in equity adjusted by the tax effect is considered in the calculation of Q1 2022 EPS. In Q1 the net impact was EUR 0.07 per share.
Q1/2022 - CEO Kari Nerg:
During the first quarter of 2022, we took significant steps in developing our compounder business model, continued successful implementation of our acquisition-driven strategy and strengthened the Group's financial position as a result of financing arrangements of EUR 75 million. Our business operations developed as expected and the financial result was good, although profitability fell slightly below expectations due to delivery transitions. We were greatly shocked by Russia's military action in Ukraine. According to our disclosure in March, we initiated measures to exit the component distribution business in Russia including a divestiture process. Evaluation of the exit options is ongoing and our goal is to find a solution as soon as possible, taking into account our personnel and existing legislation and regulations.
As regards the development of our business model, we made significant progress in Q1 when we clarified the operations under the decentralized management system in our independent companies as part of the Boreo 2.0 project. In our People & Culture strategy, we launched the Boreo Academy and related key personnel training program, followed by the launch of a talent program in the second quarter of the year. Implementation of the Operational efficiency strategy also progressed as planned when we carried out the first Boreo strategy concept project in Yleiselektroniikka Finland and focused on defining common financial indicators for Group companies.
We continued the successful implementation of our acquisition program during the quarter and announced three add-on acquisitions in line with our strategy. Pronius Oy strengthened our Technical Trade business area, Infradex Oy complemented our electronics component distribution business excellently and Vesterbacka Transport Oy offers opportunities to grow ESKP’s logistics businesses in the future. These successful acquisitions executed with moderate valuation multiples are excellent signals of our business model working from the viewpoint of entreprenerial business owners, and we are excited to continue implementing the strategy in Finland and abroad.
Positive performance continued and the Group's financial position strengthened
The financial result for the review period was good, net sales grew by 30% and operational EBIT by 22%. The result was slightly below our expectations due to some of the Heavy Machines business area’s deliveries moving to the next quarters. Net sales increased by 14% as a result of organic growth and by 16% as a result of acquisitions. The Group's financial position was strengthened by financial arrangements implemented in February (issuance of a EUR 20 million hybrid loan and a EUR 55 million credit facility). These arrangements created flexibility in the company's financial structure and support our acquisition-driven growth strategy.
Businesses performed well, result was slightly below expectations due to delivery transitions
The year started out positively for our Electronics business area and good performance continued in line with previous quarters. Operational EBIT was 8.0%. Product demand continued as good and due to the allocation situation, our businesses’ order books are historically high. Despite significant price increases, the margins in our businesses have remained good and our independent companies have managed to operate successfully in a challenging environment.
In our Technical Trade business area, the start of the year was stronger than we expected, as the profitability of Machinery's power business exceeded expectations. Profitability (operational EBIT of 7.1%) remained at a good level and operational EBIT increased by 92 % from the previous year to EUR 0.8 million (7%).
The first quarter of the year was below our expectations in the Heavy Machines business area as some of the deliveries of the concrete industry and wood transport vehicles moved to the next quarters. Net sales increased to EUR 8.2 million as a result of acquisitions, profitability (operational EBIT of 1.7%) was weak due to seasonality and delayed deliveries. In Putzmeister, Estonia performed very well and we delivered a significant number of concrete industry machines to new customers. In Finland, part of the deliveries were moved to coming quarters. In the Sany business that is being ramped up, Estonia exceeded expectations, Finland performed as expected, and Sweden's sales were below our expectations. Floby Nya Bilverkstad (FNB) had a successful start to the year in operational terms. Order books that remain record high, especially in the Putzmeister business and FNB, create strong preconditions for 2022.
The performance of Etelä-Suomen Kuriiripalvelu reported under Other Operations, continued to be good despite increasing cost pressures. With the new contracts won, the company's profitability is expected to develop positively despite the cost pressures.
The operations of Pronius, Infradex and Vesterbacka Transport that joined the Boreo family at the beginning of March, started as expected and the companies were consolidated into the Group for the first time.
The crisis in Ukraine has different impacts on our diversified businesses
Due to the diversified business model, the crisis in Ukraine has different impacts on our businesses. The most significant direct impact of the Ukrainian crisis is on the Russian component distribution business that is significantly affected by sanctions and other restrictions imposed by the Western world. The demand outlook of Finnish companies specializing in the distribution and assembly of components for defense industry customers (especially Milcon) is positively affected and the impact of the changed operating environment on our order books was already partially visible in March. Increased focus on security of supply is also expected to increase demand for Machinery’s auxiliary power business. Companies specializing in the distribution of investment-driven machinery and equipment (like Machinery's machine tool operations and Pronius) suffer from the worsening geopolitical situation and the resulting increasing uncertainty. This is reflected as a delay in customers’ investment decisions. The crisis has a negative impact on the demand outlook for the Baltic component distribution business. As a whole, we see the direct and indirect effects of the Ukrainian crisis putting pressure on the Group's performance in the near future, but we are confident about our companies’ performance in the longer term.
Vantaa, May 05, 2022
Board of Directors
mobile +358 44 341 8514
mobile +358 40 556 3546
NASDAQ Helsinki Ltd
Financial Supervisory Authority
Boreo in brief:
Boreo is a company listed on Nasdaq Helsinki that creates value by owning, acquiring and developing small and medium sized companies in Northern Europe. Boreo's business operations are organized into three business areas: Electronics, Technical Trade and Heavy Machines.
Boreo’s main objective is to create shareholder value in the long-term. It aims to achieve this with an acquisition-driven strategy, creating optimal conditions for its businesses to increase sales and improve profitability, and by being a best-in-class home for its companies and personnel.
The Group's net sales in 2021 were EUR 146.5 million and it employs some 400 people in six countries. The company’s headquarter is in Vantaa.