VR Group Half-year Report 1 January – 30 June 2024: Profitability in the first half of the year improved to the previous year's level

VR Group Half-year Report 1 January – 30 June 2024: Profitability in the first half of the year improved to the previous year's level

VR-Group Plc, Half-year Report, 16 August 2024 at 9.00 am EET 

VR's profitability improved in the second quarter after a difficult first quarter. The number of train journeys increased in city and long-distance traffic. Net sales growth was supported by new city traffic agreements in Finland and Sweden, as well as by the acquisition of long-distance train operations in Sweden. Freight traffic volumes developed positively as industrial demand recovered. Implementing the strategy and accelerating the turnaround to improve competitiveness will continue with determination.

April-June 2024 (Q2) in brief:

• The Group’s net sales increased by 7.8% to EUR 337.2 (312.7) million. Net sales excluding the impact of the 30 May 2024 acquisition from Sweden increased by 6.5 % and were EUR 333.0 million.
• Comparable operating result (EBIT) was EUR 34.6 (15.7) million or 10.3% (5.0%) of net sales.
• Operating result (EBIT) was EUR 25.7 (4.2) million, or 7.6% (1.3%) of net sales.
• Cash flow from operating activities was EUR 67.3 (55.4) million.
• The number of journeys on long-distance trains in Finland increased by 3.4% in April-June, to 3.9 (3.8) million journeys.
• Railway transport volumes in freight traffic decreased by -0.9% and amounted to 5.9 (6.0) million tonnes.
• VR Group acquired the Swedish rail operator MTR Express (Sweden) AB. The transaction was completed on 30 May 2024 and the company now operates under the name VR Snabbtåg Sverige AB.

January-June 2024 (H1):

• The Group´s net sales increased by 2.0% to EUR 628.1 (615.6) million. Net sales excluding the impact of the 30 May 2024 acquisition from Sweden increased by 1.3 % and were EUR 623.9 million.
• Comparable operating result (EBIT) was EUR 17.5 (15.4) million or 2.8 % (2.5 %) of net sales.
• Operating result (EBIT) was EUR 10.7 (7.0) million or 1.7 % (1.1 %) of net sales.
• Cash flow from operating activities was EUR 102.4 (83.6) million.
• Political strikes had a negative impact of close to EUR 20 million to the operating result.
• The number of journeys on long-distance trains in Finland increased by 2.8% to 7.4 (7.2) million journeys.
• The railway transport volumes of VR Transpoint decreased by -10.2% and amounted to 10.6 (11.8) million tonnes.

Key figures	4-6/2024	4-6/2023	1-6/2024	1-6/2023	1-12/2023
Net sales, M€	337.2	312.7	628.1	615.6	1,224.1
Comparable EBITDA, MEUR*	81.8	67.4	111.3	113.3	251.0
% of net sales	24.3	21.6	17.7	18.4	20.5
Operating result (EBIT), MEUR	25.7	4.2	10.7	7.0	81.5
% of net sales	7.6	1.3	1.7	1.1	6.7
Comparable operating result (EBIT), MEUR*	34.6	15.7	17.5	15.4	59.9
% of net sales	10.3	5.0	2.8	2.5	4.9
Net profit/loss for the period, MEUR	20.6	0.2	6.0	0.8	52.4
Cash flow from operating activities, MEUR	67.3	55.4	102.4	83.6	203.8
Investments, MEUR	66.4	42.5	120.1	79.2	186.9
Capital invested at the end of the period, MEUR	1,782.7	1,784.4	1,782.7	1,784.4	1,823.6
Comparable return on capital employed, %	8.3	4.3	2.5	2.4	4.0
Comparable return on equity, %	9.5	3.8	2.1	1.5	2.5
Net interest-bearing debt at the end of the period, MEUR	452.3	379.1	452.3	379.1	330.8
Gearing, %	37.0	31.1	37.0	31.1	26.1
Employees on average, FTE	8,331	7,870	8,331	7,870	7,765
* VR Group presents comparable operating result (EBIT) as an alternative performance indicators. The aim of comparable performance indicator is to improve comparability between reporting periods.
The calculation formulas for the figures are disclosed in VR Group’s Annual Report for 2023.
The figures are unaudited.
The comparative figures in brackets refer to the corresponding time period in the previous year, unless otherwise stated.
VR Group acquired the Swedish rail operator MTR Express (Sweden) AB. The transaction was completed on 30 May 2024 and the company’s name was changed to VR Snabbtåg Sverige AB.
The average number of personnel is the average number of personnel for the last month of the reporting period as FTE.

CEO Elisa Markula:

"VR's result clearly improved in the second quarter after a difficult first quarter, raising our profitability for the first half of the year to the previous year's level. Net sales increased by 7.8% in the second quarter. The increase was due to a higher number of journeys, new agreements in city traffic, and the completion of the acquisition of long-distance train operations in Sweden. VR's comparable EBIT was EUR 34.6 (15.7) million in the second quarter, bringing EBIT for January-June to EUR 17.5 (15.4) million. Profitability was improved by net sales growth and the planned implementation of the profit improvement programme.

We implemented our growth strategy by expanding into Sweden’s long-distance traffic with the MTRX acquisition at the end of May. In Finland, demand for rail travel was strong in the second quarter in both long-distance and city traffic. In VR Long-distance Traffic in Finland, the number of journeys increased by 3.4% and the customer load factor was 48% (48%). Long-distance customer satisfaction measured by the Net Promoter Score (NPS) decreased in the second quarter from the comparison period and was 44 (48). Customer satisfaction was mainly affected by the reduced punctuality of long-distance trains, which remained at an exceptionally low level of 78% (87%) due to track work and temporary speed limits.

In VR City traffic, the increase in passenger volumes in Finland and new contracts started in Finland and Sweden clearly improved net sales in the second quarter. VR actively participates in regional competitive tendering for contracted rail and bus traffic. In Sweden's competitive contracted traffic market, we won the traffic contracts for the Tyresö area in April and Norrtåg in July.

Net sales in VR Transpoint’s freight transport increased by 4.9% compared to the second quarter of the previous year. Rail transport volumes decreased by -0.9% to 5.9 (6.0) million tonnes. Although demand in the forestry industry has recovered compared to the corresponding period last year, volumes were negatively impacted by the industrial action that continued into April. Freight transport’s profitability was improved through greater operational efficiency, pricing changes, and an energy-savings programme that has successfully reduced energy consumption in rail transport.

Our strategy focuses on profitability, growth, and creating a values-based VR culture. In order to finance investments worth more than one billion euros and to ensure that our competitiveness is maintained, we aim for profit improvement measures worth EUR 250 million by the end of 2027. We continuously invest in improving the customer experience, while also improving operational efficiency and critically reviewing fixed costs.

Satisfied customers are at the heart of our operations. Properly targeted and sufficient state investments in rail infrastructure are necessary to improve the punctuality of trains, as about half of the delays are due to the poor condition of the track. Functional network connections are also a significant part of the customer experience on train journeys. By the end of August, all long-distance trains have been fitted with new Wi-Fi connectivity that is up to five times faster than was previously available. In order to further improve connectivity aboard trains, telecom operators also need to make investments in trackside network infrastructure.

VR supports the implementation of the rail traffic initiatives in the Finnish Government Programme. Free market-based competition in passenger traffic is complemented by publicly subsidised, competitive procurement traffic. Many regions have a desire to develop regional procurement traffic within the next few years. The establishment of an outsourced rolling-stock company would support the creation of competition in both procurement traffic and market-based traffic by lowering the threshold for entering the market. To create a competition-neutral environment, VR will divest station properties, depots, and the remaining rail infrastructure owned by the company.

I would like to thank our employees for their commitment to implementing our strategy and for their valuable work to the benefit of our customers. Together, we will continue our work to further improve the customer experience both in Finland and Sweden. We care, we work together, we drive improvement – our values guide us forward on this journey together."

Outlook for 2024

VR expects the comparable operating result for 2024 to improve compared to 2023.

The popularity of rail travel grew to record levels in 2023. Business and leisure travel on weekdays grew, and the number of journeys in long-distance traffic is expected to grow further during 2024.

VR estimates that the volumes of rail freight transport will increase in 2024 compared to the previous year, This growth will mainly be seen in the second half of the year, as a result of the improved economic situation for industry.

In city traffic, the negative impact on profitability of long-term contracts signed before the pandemic is expected to continue. Efficiency improvement measures and the renewal of the agreement base aim to improve profitability, but profitability challenges in city traffic are expected to continue.

This stock exchange release is a summary of VR Group’s Half-year Report 1 January to 30 June 2024. The complete report is attached to this release.

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