Purmo Group’s interim report January-March 2024: Clear margin improvement and solid adjusted EBITDA

24 April 2024

Purmo Group Plc | Stock Exchange Release | April 24, 2024 at 08:15:00 EEST

January–March 2024

  • Net sales decreased by 11 per cent to EUR 187.9 million (211.7). The organic1 decline in net sales was 12 per cent.
  • Net sales for the Climate Product & Systems division decreased by 9 per cent to EUR 153.3 million (169.3) and net sales for the Climate Solutions division decreased by 18 per cent to EUR 34.7 million (42.5).
  • Adjusted EBITDA increased by 1 per cent to EUR 26.6 million (26.4).
  • Adjusted EBITDA margin improved materially to 14.2 per cent (12.5) supported by the Accelerate PG programme, including strong margin management and cost savings.
  • EBIT increased to EUR 17.9 million (15.1), which included EUR -1.4 million (-3.4) of comparability adjustments.
  • Cash flow from operating activities increased to EUR 1.0 million (-1.2), mainly due to a decrease in financial items and income taxes paid.
  • Accelerate PG programme’s adjusted EBITDA run-rate improvements amounted to EUR 34.1 million (EUR 30.1 million at the end of Q4 2023), of which periodic impact for the first quarter was EUR 7.8 million (EUR 1.4 million in Q1 2023).

¹ Excluding currency effects and impacts from acquisitions and divestments.

Financial guidance 2024

Adjusted EBITDA in 2024 is expected to be on a similar or higher level than in 2023 (EUR 92.3 million).

Wholesalers’ stock levels have stabilised, and the lower interest rates support the expectations of a gradual market activity improvement. Strong margin management actions provide confidence in the guidance for the Group. However, increased geopolitical risks and high overall uncertainties can have an impact on Purmo Group’s core markets.

The strategy acceleration programme, Accelerate PG, is performing ahead of plan and further underpins Purmo Group’s outlook for 2024. The cumulative targeted adjusted EBITDA run-rate improvements of the programme will be EUR 50.0 million, which are expected to be reached by the end of 2024. The programme also targets cumulative net working capital improvements of EUR 45.0 million by the end of 2024.

Key figures

EUR million 1-3/2024 1-3/2023 Change,% 2023
Net sales 187.9 211.7 -11% 743.2
Adjusted EBITDA¹ 26.6 26.4 1% 92.3
Adjusted EBITDA margin, %¹ 14.2% 12.5% 12.4%
Adjusted EBITA¹ 20.3 19.4 4% 66.3
Adjusted EBITA margin, %¹ 10.8% 9.2% 8.9%
EBIT 17.9 15.1 19% 9.7
EBIT margin, % 9.5% 7.1% 1.3%
Profit for the period 9.4 6.7 40% -9.3
Adjusted profit for the period¹ ³ 10.5 9.3 13% 32.2
Earnings per share, basic, EUR 0.22 0.16 36% -0.32
Adjusted earnings per share, basic, EUR¹ ³ 0.26 0.25 2% 0.68
Cash flow from operating activities 1.0 -1.2 40.4
Adjusted operating cash flow, last 12 months¹ ² 87.0 88.4 -2% 75.1
Cash conversion¹ ² 94.1% 98.2% 81.4%
Operating capital employed¹ 303.1 326.4 -7% 294.7
Return on operating capital employed, %¹ 3.7% 12.6% 2.9%
Net debt¹ 230.2 226.9 1% 219.6
Net debt / Adjusted EBITDA¹ 2.49 2.52 -1% 2.38

¹ 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 40 in the January-March 2024 interim financial statements review.
² Change in net working capital includes assets held for sale. M&A and comparability adjustments totalled EUR 6.3 (2.9) million.
³ Comparative figures for Q1 2023 have been restated due to change in calculation of the key figure, see page 41 in the January-March 2024 interim financial statements review.

CEO’s review

Purmo Group delivered a clear margin expansion despite weak markets in the first quarter of 2024. No major signs of improvement in construction activity were visible in our core markets. However, we did see a sequential uptick of radiator orders in Central and Eastern Europe mainly due to some restocking and slight growing optimism regarding demand recovery. We continue to believe in and push our integrated system approach which delivers value for installers, and sustainable living for end-users.

Increase in the adjusted EBITDA in the Climate Products & Systems division, coupled with a clear margin improvement in the Climate Solution division

In the Climate Products & Systems division, we saw a pickup in radiator sales in a few regions, but experienced some weakness in other areas and product groups, leading to a decline of 9 per cent in net sales during the quarter. Demand remained generally subdued, although we noticed increasing optimism in a few markets such as Poland. Due to strong margin management, the adjusted EBITDA for the quarter grew by 5 per cent to EUR 23.7 million. Adjusted EBITDA margin improved by 2.1 percentage points from last year.

In the Climate Solutions division, we sell pre-fabricated and time-saving solution packages to our installer customers. In the first quarter, we saw continuing normalisation of the Italian market, with mixed development in other regions. As a consequence, net sales declined by 18 per cent. Even though the Nordic markets struggle in the general construction downturn, we completed an important agreement with Kastelli Talot Oy after the review period. Kastelli is the largest manufacturer of prefabricated houses in Finland. Purmo Group will design and deliver underfloor heating solutions, pipes and valves for Kastelli houses during 2024 and 2025. Although earnings in the division were supported by systematic cost savings, the adjusted EBITDA decreased by 11 per cent to EUR 5.6 million partly due to the strong comparison period last year. Nevertheless, the adjusted EBITDA margin increased by 1.4 percentage points compared to last year.

Shift to growth in the successful Accelerate PG programme

Our Accelerate PG programme continued to deliver increasing run-rate benefits in the first quarter. The programme delivered EUR 7.8 million adjusted EBITDA periodic impact in the quarter, and the total EBITDA run-rate improvements were EUR 34.1 million. Our programme’s target remains at EUR 50.0 million in run-rate improvements in adjusted EBITDA by the end of 2024. Whilst securing the targeted savings, we will pivot the programme towards generating sales growth with the same programmatic approach and attention to detail that has delivered great earnings improvements during the last years. In the growth phase, the programme targets approximately EUR 15.0 million adjusted EBITDA run-rate improvements by the end of 2025.

A road to carbon-neutrality: carbon offset radiator production started in the United Kingdom

As we wait for the green steel production in the H2 Green Steel plant in Sweden to begin, we started the production of electric radiators made of carbon offset steel in our factory in Gateshead, United Kingdom after the review period in April. In this green initiative, we utilise Arcelor Mittal’s registered green steel certificates allowing us to invest in a range of initiatives that reduce an equivalent amount of carbon emissions.

Guidance for 2024 unchanged, growth phase to start

In the first quarter of 2024, we started to gradually shift our focus to growth initiatives in the Accelerate PG programme. Due to the absence of broad-based, notable demand recovery, coupled with the APG programme and strong margin management, we keep our guidance unchanged. Adjusted EBITDA in 2024 is expected to be on a similar or higher level than in 2023 (EUR 92.3 million).

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 for analysts, investors and media representatives. At the event, CEO John Peter Leesi and CFO Jan-Elof Cavander will present the results and answer questions in English.

Participants should register through the above link 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:
Jan-Elof Cavander, 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 by 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 approximately 3,089 employees operate in 23 countries, manufacturing and distributing top-quality products and solutions to our over 100,000 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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