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Boreo Plc, INTERIM REPORT JAN. 1 TO SEP. 30, 2023


Boreo Plc, INTERIM REPORT JAN. 1 TO SEP. 30, 2023

November 2, 2023, at 9:00 EET

Decent profitability and excellent cash flow

July-September 2023

  • Net sales decreased by 5% to EUR 41.0 million (2022: 43.3).
  • Operational EBIT decreased by 3% to EUR 2.9 million (2022: 3.0) and accounted for 7.1% of net sales (2022: 6.8%)
  • EBIT decreased by 17% to EUR 2.0 million (2022: 2.4).
  • The profit for the period under review totaled EUR 1.0 million (2022: 2.1).
  • Net cash flow from operating activities was EUR 4.9 million (2022: 0.8 including operations discontinued in 2022).
  • Operational EPS was EUR 0.48 (2022: 0.83).
  • EPS was EUR 0.22 (2022: 0.63).

January-September 2023

  • Net sales grew by 8% to EUR 124.3 million (2022: 115.4).
  • Operational EBIT increased by 13% to EUR 7.4 million (2022: 6.5) and accounted for 5.9% of net sales (2022: 5.7%).
  • EBIT grew by 6% to EUR 5.1 million (2022: 4.8).
  • Net cash flow from operating activities was EUR 9.5 million (2022: 0.4 including operations discontinued in 2022).
  • The profit for the period under review totaled EUR 2.6 million (2022: 3.5).
  • Operational EPS was EUR 1.15 (2022: 1.50).
  • EPS was EUR 0.47 (2022: 0.97).
  • Net debt relative to operational EBITDA of the previous 12 months was 2.4 (2022: 2.5 and 2.4 at the end of the previous quarter).
  • Return on capital employed was 11.2% (2022: 10.8% and 11.3% at the end of the previous quarter).

Financial guidance and business model

Boreo's primary objective is sustainable long-term earnings growth. The company's business model is acquisition and long-term ownership of profitable entrepreneur-like companies that generate high capital return.  The core of the company's business model is reallocation of cash flows generated by its companies to Group companies or acquisitions with a high expected return on capital. Boreo operates in a decentralized organizational model that emphasizes local responsibility and an entrepreneurial mindset. Sustainable long-term profit growth of Group companies is ensured by supporting and training the companies and their personnel.

Boreo’s future focus is on earnings growth with attractive return on capital. The company's long-term strategic financial targets are:

  • Minimum 15% average annual operational EBIT growth
  • Minimum 15% Return on Capital Employed (ROCE)
  • Net debt to operational EBITDA between 2 and 3 (including acquired businesses as if they had been held for 12 months at the reporting date)

Boreo’s dividend policy is to pay an annually increasing dividend per share, considering capital allocation priorities.

The above-mentioned strategic financial objectives still serve as the company's financial guidelines. In line with its guidance policy, the company does not give separate short-term financial guidance.

In August 2022, Boreo sold its entire 90% holding in the electronics component distribution business in Russia. For 2023, all figures in this interim report relate to continuing operations, unless otherwise stated. In the income statement, the comparison periods have also been adjusted for continuing operations, while the data in the cash flow statement have not been adjusted in the comparison period and include discontinued operations. The December 31, 2022 balance sheet no longer includes discontinued operations. Other than that, the accounting principles of this review do not include any changes that affect comparability. The comparison figures in brackets refer to the corresponding period of the previous year, unless otherwise specified.

Group’s key figures

Key figures, continuing operations
EUR millionQ3 2023Q3 2022ChangeQ1-Q3 2023Q1-Q3 2022Change2022
Net sales41.043.3-5%124.3115.48%160.4
Operational EBIT2.93.0-3%7.46.513%8.7
relative to the net sales %7.1%6.8%-5.9%5.7%-5.4%
Profit before taxes1.42.6-48%3.24.3-26%5.5
Profit for the period, continuing operations1.02.1-50%2.63.5-27%4.4
Profit for the period, discontinued operations0.00.7-0.0-5.2--4.7
Operational net cash flow***4.90.8513%9.50.42,150%4.1
Cash conversion, %***208%23%-144%7%-51%
Equity ratio, %34.9%35.1%-34.9%35.1%-35.4%
Interest-bearing net debt36.533.98%36.533.98%30.9
Interest-bearing net debt relative to
operational EBITDA of the previous 12 months*
Return on Capital Employed (ROCE %), R1211.2%10.8%-11.2%10.8%-10.4%
Return on Trade Working Capital (ROTWC %), R1230.1%26.8%-30.1%26.8%-26.7%
Return on equity (ROE %), R128.4%13.1%-8.4%13.1%-12.1%
Personnel at end of the period34830414%34830414%327
Operational EPS, EUR**0.480.83-42%1.151.50-23%1.82
EPS, EUR**0.220.63-65%0.470.97-52%1.12
EPS, EUR, discontinued operations0.000.29-0.00-1.74--1.56
Operational net cash flow per share, EUR***1.830.30507%3.630.162160%0.82

* Calculated in accordance with the calculation principles established with financiers. The formula for calculating the indicator is presented later in this report.
**The effect of the interest rate of the hybrid bond recorded in equity adjusted by the tax effect is considered in the calculation of the EPS starting from Q1 2022. In Q3 2023, this net effect was EUR 0.12 per share, in Q1-Q3 2023, the net effect was EUR 0.36 per share, in Q3 2022, the net effect was EUR 0.12 per share, and in Q1-Q3 2022, it was EUR 0.31 per share.
***Cash flow for comparison periods includes discontinued operations. The formula for calculating the indicator is presented later in this report.

Q3/2023 - CEO Kari Nerg:

Decent profitability and excellent cash flow

In the third quarter of 2023, Boreo continued performing in a stable way.

Operational EBIT of EUR 2.9 million of the quarter was at a decent level and profitability improved from the previous year (7.1% vs. 6.8% Q3/22). Acquisitions completed last year contributed to the result by EUR 0.5 million, whereas organic earnings growth was negative by EUR 0.5 million. Yleiselektroniikka, the YE International businesses in the Baltics and the Technical Trade businesses performed well compared to the third quarter of 2022. Signal Solutions Nordic (SSN), Floby Nya Bilverkstad (FNB) and the Construction business of Machinery, on the other hand, were significantly below last year. The result was also weakened by a EUR 0.1 million write-down related to the exit from SANY operations in Finland and Sweden.

Our actions to reduce working capital were successful and as a result cash flow was extremely strong (cash conversion 208%). In particular, the successful reduction of inventory at our largest company Machinery contributed positively to capital efficiency. Despite this, ROCE of 11.2% remained at the level of the previous quarter as a result of moderate performance. Return on Trade Working Capital (ROTWC) improved to 30.1%.

In line with recent history, the company’s financial position remained solid. Net debt at the end of the quarter was EUR 36.5 million and net debt relative to EBITDA of the previous 12 months remained at 2.4. The firm’s available liquidity at the end of September 2023 was approximately EUR 20 million. In addition to liquidity in place to support operations, the company has a EUR 8 million acquisition facility available for acquisitions.

During the last year, the Group’s operational EBIT has increased by 14% and the operational EBIT margin has improved from 5.4% to 5.7%. During this period, we have successfully improved capital efficiency, and as a result of strong cash flow (cash conversion 151%), ROTWC has risen from 27% to 30% and ROCE from 10.8% to 11.2%. The recent financials of the Group are still negatively impacted by the contribution of figures related to the exited Finnish and Swedish SANY-operations. Excluding the SANY business, the Group’s operational EBIT would have increased by 19% over the past 12 months, with a ROTWC of 32.5% and a ROCE of 11.8%.

The two largest business areas continue to operate steadily

Our Technical Trade business area recorded a strong quarter both in terms of profitability (12.5%) and cash flow. The performance was supported by continued good performance of Machinery’s Power business, Pronius, J-Matic and Filterit. The increased turmoil in the Finnish construction sector impacted the activity of Machinery’s Construction equipment business significantly whereas the impacts to Muottikolmio’s operations remained less visible.

Within the Electronics Business Area, Delfin Technologies started its journey successfully as part of Boreo. In addition, the electronic component distribution businesses both in Finland (Yleiselektroniikka) and the Baltic countries (YE International) performed better than in the comparison period despite headwinds in demand. SSN’s challenges started to ease from the first half of the year, but the company’s run-rate performance continues to be behind the strong 2022. The profitability of the business area was decent (6.3 %) and the cash flow was at a good level.

The performance of the Heavy Machines business area was impacted by FNB’s challenges

The Putzmeister operations in Finland, Sweden and Estonia continued to perform steadily and we continued to defend our leading market position successfully.

Uncertainty related to new investments has increased together with the overall slow-down of construction activity in our target markets. Supported with our market leading position and the less cyclical aftermarket activities, we, however, remain confident of our businesses’ ability to operate in a decent way in possible market downturn. In addition, we see the trend of green transformation to which we are well positioned through the leading positioning of our OEM partner to positively contribute to the competitiveness of our business in the coming years.

In FNB, we have during the first nine months of 2023 undergone investments in improving the efficiency of production processes and a new ERP system. In addition, we have undergone a change in the company’s management. These measures will strengthen FNB’s operational business but have impacted negatively on company’s result during the year. We have also managed to overcome a significant part of the operational challenges, but due to the continuous availability and delivery challenges, the company’s net sales remained low and we haven’t reached the profitability targets we set for the company.

Our companies show resiliency in a challenging environment, and we are confident of our ability to create shareholder value in the long-term

Due to challenges faced by a few of our companies, our current performance is at a lower level that we see to be possible for the current portfolio in different economic cycles. At the same time, we are pleased with the performance of most of our companies in an operating environment characterized by weaker demand, increased prices and tougher competition. The stable gross margin development of our companies and the successfully maintained market positions are clear signals of our companies’ strong positioning in their value chains. The current challenges at SSN and FNB are of temporary nature and we remain confident of the companies’ long-term competitiveness.

Strong cash flow generation during the last 12 months is an important signal for us of the fact that the return on capital and capital efficiency mindset is increasingly rooted into the minds our people. Of this we’re grateful and would like to express our gratitude for the entire organization.

Signs of weakened economic activity have increased over the last six months. As a result, and in addition to our strategic targets – earnings growth and capital efficiency, we have increased our focus on cost control. Even though we have hedged a significant share of our financing against increases in interest rates, changes in the interest environment have increased the group’s financing costs. In the short-term one of our objectives is to strengthen shareholders’ value creation by maintaining the firms’ indebtedness at the low end of our leverage target (net debt to EBITDA 2-3x). We continue to evaluate new acquisition targets and are prepared to act on new opportunities which we can execute by maintaining a solid financial position and creating value for the shareholders.

Briefing for investors, analysts and media

A webcast where CEO Kari Nerg and CFO Aku Rumpunen present the January-September 2023 interim report will be held today, November 2, 2023, at 11:00 am EET. The presentation is in English and questions can be asked after the presentation. The presentation material is available before the webcast on Boreo's website:

You can watch the webcast at:

The event will be recorded, and the recording will be available after the event at:

Vantaa, November 02, 2023


Board of Directors

Additional information:

Kari Nerg
tel +358 44 341 8514

Aku Rumpunen
tel +358 40 556 3546

NASDAQ Helsinki Ltd
Financial Supervisory Authority
Principal media

Boreo in brief:

Boreo is a company listed on Nasdaq Helsinki that creates value by owning, acquiring and developing small and medium sized companies in the long term. Boreo's business operations are organized into three business areas: Electronics, Technical Trade and Heavy Machines.

Boreo's primary objective is sustainable long-term earnings growth. The company's business model is acquisition and long-term ownership of profitable entrepreneur-like companies that generate high capital return.  The core of the company's business model is reallocation of cash flows generated by its companies to Group companies or acquisitions with a high expected return on capital. Boreo operates in a decentralized organizational model that emphasizes local responsibility and an entrepreneurial mindset. Sustainable long-term profit growth of Group companies is ensured by supporting and training the companies and their personnel.

The Group's net sales in 2022 were EUR 160 million and it employs over 300 people in seven countries. The company’s headquarter is in Vantaa.


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