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
