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 Treial CFO and Member of the Management Board +372 674 7400
