KH Group Plc’s Business Review January–September 2023: Profitable business in a challenging market
KH Group Plc
Stock Exchange Release 1 November 2023 at 8:00 am EET
KH Group Plc’s Business Review January–September 2023
Profitable business in a challenging market
This is the summary of the Business Review for January–September 2023. The complete Review is attached to this release and is also available on the company’s website at www.khgroup.com.
First quarter as a conglomerate
Based on the change in strategy announced on 15 December 2022, Sievi Capital Plc transformed its operations from a private equity investment company into a conglomerate on 4 May 2023 by a decision of the Annual General Meeting. In connection with this, the company’s name was changed to KH Group Plc. The trading code of the share was previously SIEVI and was changed to KHG as a result of the change of the trade name on 10 May 2023.
KH Group’s strategy will no longer include making private equity investments in new industries. The medium-term objective is to become an industrial group built around the KH-Koneet business. The development of other business areas will continue in the same way as before, and the aim is to divest them in line with the previous investment strategy.
KH Group did not previously consolidate the data of its subsidiaries into Group-level calculations line item by line item, but recognised investments in the companies at fair value through profit and loss. Starting from 1 May 2023, the Group has consolidated its subsidiaries into the income statement and balance sheet line item by line item. More information on the change in accounting principles and its significant effects on the reported figures is provided in the tables section.
The following unaudited pro forma financial figures have been prepared for illustrative purposes only. The pro forma figures aim to illustrate the comparable result of the segments and the Group if the change in investment entity status had taken place on 1 January 2022, and the companies that were part of the group structure on 30 September 2023 had been consolidated into the income statement line item by line item for the periods 1 January–31 December 2022 and 1 January–30 September 2023.
The unaudited pro forma figures are based on the subsidiaries’ audited financial statements for the financial year 2022 and on unaudited accounting figures for the periods 1 January–30 September 2022 and 1 July–30 September 2023.
The segment and consolidated income statement comments have been prepared on the basis of pro forma figures, unless otherwise stated. The section "Pro forma financial information" presents more detailed accounting policies. KH Group has not drawn up pro forma figures for balance sheet and cash flow items.
KH Group, July–September 2023 pro forma
- Net sales amounted to EUR 100.4 (107.5) million.
- Operating profit was EUR 5.1 (6.0) million.
- The net sales of KH-Koneet significantly decreased year-on-year due to the weakened general market situation. Profitability was supported by operational efficiency improvement and the machinery leasing business.
- Indoor Group’s net sales were nearly on a par with the corresponding period last year, and profitability improved when compared to the early part of the year.
- HTJ and NRG achieved profitable growth.
- The Group’s cash and cash equivalents remained strong and amounted to EUR 19.4 million at the end of the review period. The parent company used cash proceeds from the Logistikas divestment to repay a bank loan of EUR 10 million in full.
KH Group, January–September 2023 pro forma
- Net sales amounted to EUR 309.3 (323.2) million.
- Operating profit was EUR 7.3 (8.5) million.
KH Group, January–September 2023 reported IFRS
- Net sales amounted to EUR 172.5 (-) million. The figure includes net sales accumulated in May–September.
- Operating profit was EUR -16.1 (-8.5) million.
- Net profit for the period was EUR -12.1 (-6.9) million.
- Earnings per share (undiluted and diluted) were EUR -0.15 (-0.12).
- Equity per share at the end of the review period was EUR 1.39 (1.49).
- Return on equity for rolling 12 months was -16.1% (4.1%).
- Gearing at the end of the review period was 202.7% (13.8%).
- Gearing excluding lease liabilities was 80.2% (13.6%).
CEO Lauri Veijalainen:
“I started as the CEO of KH Group and Indoor Group on 1 August 2023.
Our consolidated pro forma net sales declined slightly year-on-year, as did our operating profit. The challenging general market situation had an impact on the net sales of both KH-Koneet and Indoor Group. For KH-Koneet, net sales in Finland decreased significantly less than in its other main market, Sweden but nevertheless, KH-Koneet’s profitability improved compared to the first half of the year. For Indoor Group, it was positive that the Sotka chain outperformed the market by a clear margin in terms of the development of net sales during the review period. The Insofa furniture factory’s order book remained strong throughout the review period. Both of Indoor Group’s chains continued to actively implement measures aimed at enhancing operational efficiency and improving profitability. These measures included increasing visitor volumes and sales, improving conversion rates, strengthening margins and maintaining careful cost control.
In October, Indoor Group Holding Oy received commitments from its largest shareholders regarding an additional investment totalling EUR 2.75 million to strengthen its balance sheet position. KH Group’s share of the additional investment is EUR 2.1 million. The additional investment will be made by the end of December 2023.
For HTJ and Nordic Rescue Group, pro forma net sales and operating profit improved year-on-year. Nordic Rescue Group’s operating profit turned positive during the review period. HTJ’s performance was supported by the growth of the project portfolio and the acquisitions made in 2022–2023. Nordic Rescue Group’s business now has a much better foundation after the Group ceased the loss-making rescue lift business at the end of last year. The demand for rescue vehicles in Finland and Sweden has remained stable.
In the fourth quarter, we will continue our development efforts across our business areas, many of which are focusing on operational efficiency. At the same time, we will continue to move forward with KH Group’s change in strategy as planned.
KH Group, Pro forma key figures
The accounting principles applied in preparing the pro forma figures and reconciliations are presented later in the report under “Pro forma financial figures”.
|Pro forma EBITDA (1)||13.8||14.0||32.6||31.5||43.1|
|Pro forma operating profit (EBIT)||5.1||6.0||7.3||8.5||12.2|
|Operating profit (EBIT), %||5.1%||5.6%||2.4%||2.6%||2.8%|
|Pro forma profit before taxes||2.8||4.1||-1.0||3.0||4.5|
(1) EBITDA = operating profit + depreciation and amortisation
KH Group, July–September, pro forma
KH Group’s pro forma net sales amounted to EUR 100.4 (107.5) million, representing a year-on-year decline of 7%. Net sales increased in HTJ and Nordic Rescue Group, and decreased in KH-Koneet and Indoor Group. Operating profit for the review period came to EUR 5.1 (6.0) million. The operating profit margin decreased by 0.5 percentage points to 5.1%. All segments recorded a positive operating profit. The parent company’s share of the operating profit for the review period was EUR -0.8 (-0.3) million. The factors contributing to the parent company’s increased operating expenses include project expenses associated with the change in strategy and non-recurring items related to organisational restructuring, which totalled EUR 0.5 million for the review period.
In spite of the challenging market and resulting decrease in net sales, we managed to maintain operating profit close to the previous year’s level. The Group’s pro forma profit before taxes for the review period was positive by a clear margin.
KH Group, January–September, pro forma
KH Group’s net sales decreased by 4% to EUR 309.3 (323.2) million. Net sales increased in HTJ and Nordic Rescue Group and decreased in KH-Koneet and Indoor Group. Operating profit was positive in all business segments. Of the segments, Nordic Rescue Group and HTJ improved their operating profit year-on-year, and their profitability has turned positive by a clear margin. The parent company’s share of the operating profit for the review period was EUR -2.2 (-1.4) million. The factors contributing to the parent company’s increased operating expenses include project expenses and non-recurring items associated with the change in strategy, which totalled EUR 0.8 million for the review period.
Events after the review period
KH Group’s group company Indoor Group Holding Oy received commitments in October from its largest shareholders regarding additional investment totalling EUR 2.75 million to strengthen its balance sheet position. KH Group Plc’s share of the additional investment is EUR 2.1 million. The additional investment will be made by the end of December 2023.
KH Group’s medium-term objective is to become an industrial group built around the KH-Koneet business and to divest other business areas in line with previous strategy. At the same time, active developments will continue regarding other business areas. Exit planning and the assessment of exit opportunities for the other business areas will also continue.
In accordance with KH Group’s current financial guidance practices, the company does not issue a separate Group-level financial guidance. KH Group’s strategy and financial targets will be presented at the Capital Markets Day to be held on 29 November 2023.
KH GROUP PLC
CEO Lauri Veijalainen, tel. +358 46 876 1648
Nasdaq Helsinki Ltd
Sievi Capital is now a conglomerate with a new name KH Group. Our four business areas are leading players in their sectors in B2B products and services and consumer trade. The objective of our strategy change is to focus on the business of the earth-moving machinery supplier KH-Koneet. KH Group’s share is listed on Nasdaq Helsinki.
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