Purmo Group’s interim report 1 January–31 March 2023: Solid earnings and cash flow, Accelerate PG ahead of plan

26 April 2023

Purmo Group Plc | Stock Exchange Release | 26 April, 2023 at 08:15 AM EEST

January–March 2023

  • Net sales decreased by 10 per cent to EUR 211.7 million (236.2). Organic 1) net sales decline was 11 per cent.
  • Net sales for Climate Product & Systems division decreased by 13 per cent to EUR 169.3 million (194.5) and net sales for Climate Solutions division increased by 2 per cent to EUR 42.5 million (41.8).
  • Adjusted EBITDA decreased by 9 per cent to EUR 26.4 million (29.2), corresponding to an adjusted EBITDA margin of 12.5 per cent (12.4).
  • EBIT was EUR 15.1 million (14.1), which included EUR -3.4 million (-7.5) of comparability adjustments.
  • Cash flow from operating activities increased to EUR -1.2 million (-38.9).
  • Adjusted EBITDA run-rate improvements amounted to EUR 12.1 million in Accelerate PG.

Financial guidance for 2023

Purmo Group reiterates its financial guidance for 2023. Adjusted EBITDA in 2023 is expected to be on a similar level to 2022 (EUR 92.9 million). Similar means being within +/- 5 per cent of the previous year.

The solid earnings performance during the first quarter combined with the ahead of plan progress of the Accelerate PG programme provides confidence in the outlook for the rest of the year. Purmo Group reiterates the previously communicated targets for the Accelerate PG programme – targeted adjusted EBITDA run-rate improvements of EUR 20 million by the end of 2023 and cumulatively EUR 40 million by the end of 2024.

The visibility for 2023 is limited due to macroeconomic uncertainties and the market environment continues to be challenging in Purmo Group’s addressable markets. Furthermore, the guidance also factors in that Purmo Group is building up capabilities to facilitate future growth which impacts the company’s cost base, and hence, the net savings from the Accelerate PG programme.

Key figures
EUR million 1–3/2023 1–3/2022 Change, % 2022
Net sales 211.7 236.2 -10% 904.1
Adjusted EBITDA 2) 26.4 29.2 -9% 92.9
Adjusted EBITDA margin, % 2) 12.5% 12.4% 10.3%
Adjusted EBITA 2) 19.4 22.3 -13% 64.6
Adjusted EBITA margin, % 2) 9.2% 9.5% 7.1%
EBIT 15.1 14.1 7% 39.0
EBIT margin, % 7.1% 6.0% 4.3%
Profit for the period 6.7 6.5 3% 13.1
Adjusted profit for the period 2) 10.1 14.0 -28% 34.9
Earnings per share, basic, EUR 0.16 0.16 0% 0.32
Adjusted earnings per share, basic, EUR 2) 0.24 0.34 -29% 0.85
Cash flow from operating activities -1.2 -38.9 97% 31.1
Adjusted operating cash flow, last 12 months 2) 88.4 18.6 376% 51.9
Cash conversion 2) 98.2% 17.8% 55.9%
Operating capital employed 2) 326.4 328.2 -1% 305.0
Return on operating capital employed 2) 12.6% -0.4% 3) 12.2% 3)
Net debt 2) 226.9 301.0 -25% 275.2
Net debt / Adjusted EBITDA 2) 2.52 2.89 -13% 2.96
1) Adjusted for currency effects and impacts from acquisitions and divestments.
2) Purmo Group presents certain measures of financial performance, financial position and cash flows, which are alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority (“ESMA”). For the detailed definitions and reconciliation of alternative performance measures see page 41 in the January-March 2023 interim report.
3) Comparative figures have been restated due to change in calculation of key figure, see page 42 in the January-March 2023 interim report.

CEO’s review

The market environment during the first quarter of the year was characterised by high inflation, increasing interest rates, and weak demand in the renovation and new build segments. However, stock levels at wholesalers normalised during the quarter, and we were successful in implementing price increases and cost savings.

Net sales in the first quarter of the year declined by 10 per cent to EUR 211.7 million. Adjusted EBITDA was EUR 26.4 million, a decline of 9 per cent. Adjusted EBITDA margin was 12.5 per cent.

Solid earnings in Climate Products & Systems achieved through successful margin and cost management; earnings declined in Climate Solutions against strong comparison period in 2022

The new business divisions, Climate Products & Systems and Climate Solutions, are now effective and have been operating since January 2023. They represent the company’s focus on increasing solution selling, and creating synergies within the Group as a whole.

During the first quarter of the year, demand continued to be weak, impacting sales volumes for the Climate Products & Systems division. However, the weak net sales performance was compensated by successful margin management and cost control. Realised price increases and the impact of successful input cost management had a significant positive effect on the adjusted EBITDA margin. Net sales declined by 13 per cent to EUR 169.3 million, and adjusted EBITDA remained approximately at last year’s level of EUR 22.7 million. The adjusted EBITDA margin increased to 13.4 per cent (against 11.8 per cent in the previous year).

Earnings declined in the Climate Solutions division compared with the same quarter last year. Italy saw a more normalised market environment compared to the first quarter in 2022, which was characterised by exceptionally high heat pump sales volumes and higher prices, partly due to the delivery of backlog orders from 2021. Net sales increased by 2 per cent to EUR 42.5 million. The increase in net sales was due to the Thermotech business which was consolidated to the Group for the entire quarter compared to one month in the comparison period. Adjusted EBITDA decreased to EUR 6.2 million, from EUR 8.5 million in the previous year. The adjusted EBITDA margin declined to 14.7 per cent, compared with 20.2 per cent in the previous year particularly due to strong comparison period in Italy.

Accelerate PG programme progressing ahead of plan

The progress of Purmo Group’s ongoing strategy acceleration programme was strong and ahead of plan during the first quarter of the year. Implemented adjusted EBITDA run-rate improvements at the end of the quarter amounted to EUR 12.1 million, up from EUR 1.4 million at the end of 2022, while our target for 2023 is EUR 20 million. The most significant improvements within the programme have been generated from pricing optimisation, cost reductions from operating model changes, procurement savings and improvement in net working capital efficiency.

During the first quarter, Purmo Group issued a green hybrid bond in the amount of EUR 60.0 million. This was to ensure the funding for the strategy acceleration programme. The net proceeds from the issue will be used in accordance with the company’s green finance framework which was announced in February 2023.

Financial guidance for 2023 remains unchanged

As a result of solid earnings for the first quarter of the year, we are well positioned to deliver our guidance for 2023: Adjusted EBITDA in 2023 is expected to be on a similar level to 2022 (EUR 92.9 million). Similar means being within +/- 5 per cent of the previous year.

Furthermore, thanks to strong results in Accelerate PG, we stay confident in reaching the targets for the programme – targeted adjusted EBITDA run-rate improvements of EUR 20 million by the end of 2023 and cumulatively EUR 40 million by the end of 2024.

News conference and webcast for analysts, investors and media

The publication will be followed at 10.00 a.m. EEST by a live webcast and a teleconference to analysts, investors and media representatives. At the event, CEO John Peter Leesi and CFO (interim) & Vice Chairman of the Board Matts Rosenberg will present the results and answer questions in English.

Webcast: https://purmogroup.videosync.fi/2023-q1-results

Teleconference lines: http://palvelu.flik.fi/teleconference/?id=10010611

Participants should register through the above link if they wish to ask questions through the conference call lines. After registering they will receive a teleconference number and a code to join the call. Participants will be asked to press number 5 to join the queue for questions.

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

Purmo Group Plc

Further information:
Matts Rosenberg, interim Chief Financial Officer, Purmo Group Plc
Katariina Kataja, Head of Investor Relations, Purmo Group Plc, Tel. +358 40 527 1427

Nasdaq Helsinki Ltd
Principal media

About Purmo Group:
Purmo Group is at the centre of the global sustainability journey, offering full solutions and sustainable ways of heating and cooling homes to mitigate global warming. We provide complete heating and cooling solutions to residential and non-residential buildings, including underfloor heating and cooling systems, a broad range of radiators, heat pumps, flow control and hydronic distribution systems, as well as smart products. Our mission is to be the global leader in sustainable indoor climate comfort solutions. Our 3,400 employees operate in 24 countries, manufacturing and distributing top quality products and solutions to our customers in more than 100 countries. Purmo Group’s shares are listed on Nasdaq Helsinki with the ticker symbol PURMO. More information: www.purmogroup.com.

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