Purmo Group’s Half-year Report 1 January–30 June 2022: Solid earnings and strategy execution on track

11 August 2022

Purmo Group Plc, stock exchange release, 11 August 2022 at 08:15EEST

April-June 2022

  • Net sales improved by 16 per cent to EUR 245.0 million (212.1). Organic growth1) was 10 per cent.
  • Adjusted EBITDA improved by 4 per cent to EUR 27.8 million (26.8), corresponding to an adjusted EBITDA margin of 11.4 per cent (12.6).
  • EBIT was EUR 15.9 million (17.7), which included EUR -3.6 million (-1.0) of comparability adjustments.
  • Cash flow from operating activities was EUR 32.0 million (12.6)

January-June 2022

  • Net sales improved by 20 per cent to EUR 481.2 million (402.5). Organic growth1) was 15 per cent.
  • Adjusted EBITDA improved by 2 per cent to EUR 57.0 million (55.9), corresponding to an adjusted EBITDA margin of 11.9 per cent (13.9).
  • EBIT was EUR 30.0 million (36.4), which included EUR -11.1 million (-3.9) of comparability adjustments.
  • Cash flow from operating activities was EUR -6.9 million (5.6)
  • The acquisition of Thermotech was completed on 1 March 2022

Financial guidance for 2022
Purmo Group reiterates its financial guidance for 2022: For 2022, Purmo Group expects net sales to increase from 2021 (EUR 843.6 million). Adjusted EBITDA is expected to be comparable to 2021 (EUR 103.9 million). Comparable means a change within +/- 5 per cent from the previous year.

Key figures and financial performance

EUR million 4-6/2022 4-6/2021 Change, % 1-6/2022 1-6/2021 Change, % 2021
Net sales 245.0 212.1 16% 481.2 402.5 20% 843.6
Adjusted EBITDA 27.8 26.8 4% 57.0 55.9 2% 103.9
Adjusted EBITDA margin 11.4% 12.6%   11.9% 13.9%   12.3%
Adjusted EBITA 20.6 19.5 6% 43.0 41.8 3% 76.6
Adjusted EBITA margin 8.4% 9.2%   8.9% 10.4%   9.1%
EBIT 15.9 17.7 -10% 30.0 36.4 -17% 3.5
EBIT margin 6.5% 8.4%   6.2% 9.0%   0.4%
Profit for the period 8.4 12.3 -32% 14.9 24.2 -39% -18.8
Adjusted profit for the period 12.0 13.3 -10% 25.9 28.2 -8% 51.4
Earnings per share, basic, EUR2) 0.20 0.43 -53% 0.36 0.84 -57% -0.65
Adjusted earnings per share, basic, EUR2) 0.29 0.46 -37% 0.63 0.98 -36% 1.77
Cash flow from operating activities 32.0 12.6 154% -6.9 5.6 -224% 35.4
Adjusted operating cash flow, last 12 months3) 38.8 94.1 -59% 53.1
Cash conversion4)   37.0% 89.5%   51.1%
Operating capital employed5) 307.3 271.5 13% 271.8
Return on operating capital employed6)   -0.9% 22.3%   1.3%
Net debt 279.3 102.7 172% 239.5
Net debt / Adjusted EBITDA7) 2.7 1.0 172% 2.3

1)Adjusted for currency effects and impacts from acquisitions and divestments.
2)The number of shares in the comparison period are those of Purmo Group Ltd, 30 June 2021 Purmo Group Ltd shares amounted to 11,073,834 which have been converted using 31 December 2021 merger conversion ratio 2.600334506.
3) Adjusted EBITDA on a rolling 12-month basis less by the change in net working capital and capex on a rolling 12-month basis.
4)Adjusted operating cash flow divided by Adjusted EBITDA, both on a rolling 12-month basis.
5)Net working capital, other intangible assets, property, plant and equipment, and right-of-use-assets.
6)EBIT based on a rolling 12-month calculation divided by operating capital employed. Return on operating capital employed without non-recurring items was 24% (28%).
7)Adjusted EBITDA based on a rolling 12-month basis.

Unless otherwise stated, the comparison figures in parentheses refer to the corresponding period in 2021. The full year 2021 non-adjusted key figures are affected by a one-time, non-cash IFRS 2 merger impact of EUR 52.3 million as a result of the merger of Virala Acquisition Company Plc and Purmo Group Ltd on 31 December 2021, as well as EUR 17.9 million other items affecting comparability.

CEO’s review
During the second quarter of 2022, net sales improved by 16 per cent to EUR 245.0 million. Adjusted EBITDA grew by 4 per cent to EUR 27.8 million and the adjusted EBITDA margin declined slightly to 11.4 per cent. Cash flow from operating activities improved to EUR 32.0 million.

The European construction market started to show signs of softening in both the new-build and renovation markets. A notable exception was Italy, an important market for Purmo Group, where we benefited from a strong trend to improve energy efficiency of buildings. Energy efficiency of buildings is at the heart of what we do and a key growth driver for Purmo Group.

Demand for electrical emitters and low-temperature convectors increased and the transition to solar power, heat pumps and underfloor heating continued. These trends were further supported by government incentives encouraging de-carbonisation through improved energy efficiency of buildings and are good examples that show how sustainability affects our industry. Rising energy prices accelerate the green transition, which supports our strategic direction.

Purmo Group showed resilience in an exceptional market environment and was able to deliver solid earnings in the second quarter.

Compared to 2019, Purmo Group's adjusted EBITDA has increased by over 60 per cent thanks to revenue growth, structural cost improvements, and a more attractive sales mix. Our strategic transition to a solutions business, our continued cost improvements, and our active focus on M&A provide a great foundation for realising continued adjusted EBITDA growth and to meet our mid- to long term financial targets.

Continued strength in the ICS division
The ICS division’s net sales increased by 28 per cent. Demand continued to be on a good level in core markets and the Thermotech acquisition supported growth. The adjusted EBITDA margin was 12.4 per cent, at the same level as last year. ICS had an improved sales mix driven by increased system sales in Italy.

The Radiators division’s net sales increased by 6 per cent. Sales price increases were implemented to mitigate significant cost inflation. These more than offset lower sales volumes. The adjusted EBITDA margin was 12.1 per cent, slightly below last year’s level. The margin was impacted by reduced operational efficiencies caused by lower production volumes.

On 4 July, Barry Lynch was appointed new Senior Vice President of the Radiators division and member of the Management Team. We welcome Barry and thank Tomasz Tarabura for his strong contribution and integral role in developing Purmo Group and the Radiators division.

Solid progress in strategy execution
We made tangible progress in developing our solutions business. The newly acquired Thermotech was fully onboarded during the second quarter. Both Emmeti in Italy and Thermotech in the Nordics performed well during the review period and they continue to be our flagship performers in selling complete systems. We also made investments in solution-sales training to grow sales to specifiers in other key geographies. Overall, we continue to see great growth potential in our solutions business, both organically and through further acquisitions.

In smart products, we launched a new version of our ULOW emitter, which offers fast reaction time and low energy consumption. We also launched Unisenza, our own electronic control system for underfloor heating and cooling, which provides ease of installation for installers and an intuitive digital platform for comfort control to end-users.

We continued to improve operational efficiency. The completed plant closure in Ireland will bring consolidation synergies when relocating operations to our existing sites in Italy and Sweden. The implementation of Purmo Group Operating System (PGOS), based on LEAN manufacturing principles, have delivered further benefits through our pilot-implementations in Hungary, Poland and Germany.

We are actively assessing various M&A opportunities to support the realisation of our strategic objectives. Our process for exiting Russia is also proceeding according to plan.

Financial guidance for 2022 remains unchanged
Purmo Group reiterates its guidance for 2022. Net sales are expected to increase from 2021 (EUR 843.6 million). Adjusted EBITDA is expected to be comparable to 2021 (EUR 103.9 million).

The softening construction market and increased uncertainty in the macroeconomic outlook is offset by potential upside from successfully mitigating raw material price inflation. On balance, this gives us confidence to keep the guidance unchanged.

We are passionate about sustainable indoor climate comfort solutions. We want to thank our people, partners and customers for continuing to develop our business in a positive and exciting direction.

News conference and webcast for analysts, investors and media
Purmo Group’s half-year report January–June 2022 has been published today and is available in English and Finnish on Purmo Group’s website at https://investors.purmogroup.com/ir-material/

CEO John Peter Leesi and CFO Erik Hedin will present the results to analysts, investors and media representatives in a live webcast at https://purmogroup.videosync.fi/half-year-report-2022/ on Thursday 11 August 2022 at 10:00 Finnish time (EEST). The event, including the Q&A session, will be held in English.

The webcast can also be attended via teleconference. To participate in the teleconference, participants are asked to dial in at least 5 minutes before the start of the event using one of the following telephone numbers and teleconference pin:

Finland Toll: +358 (0)9 7479 0572

Sweden Toll: +46 (0)8 5664 2754

United Kingdom Toll: +44 (0)330 165 3641

United States Toll: +1 646-828-8082

Teleconference PIN: 996752#

A recording of the event will be available on https://investors.purmogroup.com/ir-material/ shortly after the event has ended.

Purmo Group Plc

Further information:
Erik Hedin, CFO of Purmo Group Plc, tel. +44 7979 363 473
Josefina Tallqvist, Investor Relations (interim), tel. +358 40 745 5276

Nasdaq Helsinki Ltd
Principal media

Purmo Group Plc is a leader in sustainable indoor climate comfort solutions in Europe. We provide complete heating and cooling solutions to residential and non-residential buildings, including radiators, towel warmers, underfloor heating, convectors, valves and controls. Our mission is to be the global leader in sustainable indoor climate comfort solutions. Our approximately 3,500 employees operate through 46 locations in 21 countries, manufacturing and distributing top quality products and solutions to customers in more than 100 countries globally. Purmo Group Plc’s shares are listed on Nasdaq Helsinki (symbol: PURMO). www.purmogroup.com

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