HLRE Holding Plc´s interim report 1 February - 31 October 2024

Comparison figures in brackets refer to the corresponding period previous year.

 

Brief Look at August - October 2024 

• Q3 revenue decreased by 5% to EUR 33,6 EUR million (EUR 35,4 Million).
• Q3 gross profit decreased to EUR 14,0 million (EUR 14,3 Million).
• Q3 adjusted EBITDA was EUR 3,6 million (EUR 4,8 million).
• Q3 net cash from operating activities was EUR 4,2 million (EUR 8,5 Million).

   

Brief Look at February – October 2024 

• Q1-Q3 revenue decreased by 10% to EUR 79,3 EUR million (EUR 87,8 Million).
• Q1-Q3 gross profit decreased to EUR 31,6 million (EUR 35,2 Million).
• Q1-Q3 adjusted EBITDA was EUR 5,0 million (EUR 7,2 million).
• Q1-Q3 net cash from operating activities was EUR 1,6 million (EUR 10,5 Million).

Key Figures

HLRE HOLDING GROUP  EUR Million	Aug– Oct 24 Q3	Aug– Oct 23 Q3	Feb- Oct 24 Q1-Q3	Feb– Oct 23 Q1-Q3	Feb 23 – Jan 24 Q1-Q4
Revenue	33,6	35,4	79,3	87,8	108,2
Gross profit	14,0	14,3	31,6	35,2	42,6
Gross margin,%	41,6 %	40,4 %	39,8 %	40,1 %	39,4 %
Adjusted EBITDA	3,6	4,8	5,0	7,2	3,8
EBIT	1,9	2,6	-0,6	0,2	-10,7
Net cash from operating activities	4,2	8,5	1,6	10,5	4,3

 

Company description

HLRE Holding Group (commonly known as Vesivek Group) is a leading provider of roof and roof product renovations offered primarily to detached and row houses in Finland and Sweden under the brand name Vesivek. In addition to roof and roof product installations, Vesivek provides underground drain renovations in eight locations in Finland. The Group also develops, manufactures, and sells high quality rainwater systems and roof safety products.

HLRE Holding Group operates in 14 locations in Finland and three locations in Sweden in October 2024 and employs around 730 employees currently on average. The Group has two in-house manufacturing facilities in Finland, steel roofing profile production in Pirkkala and manufacture of rainwater systems and roof safety products in Orimattila.

Management Overview of the third quarter

 

In the third quarter of 2024, the Group's installation operations in Finland showed improvement compared to previous quarters but fell short of the set targets. Low sales volumes and short order backlogs in certain units resulted in installation inefficiencies, which were the primary contributors to the weaker overall performance.

In Sweden, the roof installation business demonstrated improvement; however, it also did not meet the defined targets. Meanwhile, direct product sales in Finland declined compared to the previous year, although profitability remained at a satisfactory level.

Short-term market growth expectations for installation business areas in both Finland and Sweden remain subdued. This outlook necessitates a focus on increasing market share across the Group, coupled with stringent cost control measures.

 

 

Third quarter August - October 2024

Q3 revenue decreased by 5 % to EUR 33,6 Million (35,4 Million). Low sales volumes and short order backlog in some of the roof and underground drain installation units in Finland had negative impact both on revenue and profit in Q3. Gross profit was EUR 14,0 Million (14,3 Million) in Q3.

Q3 reported EBITDA was EUR 3,6 Million (4,8 Million) and adjusted EBITDA EUR 3,6 Million (4,8 Million). There were no reported adjustments in Q3.

Q3 net cash from operating activities was EUR 4,2 Million (8,5 Million) due to weaker business performance and some negative net working capital changes. Net change in cash and cash equivalents in Q3 was EUR 3,4 Million (7,1 Million).

 

February-October 2024

Q1-Q3 revenue decreased by 10% to EUR 79,3 EUR Million (EUR 87,8 Million) and gross profit decreased to EUR 31,6 million (EUR 35,2 Million).Q1-Q3 reported EBITDA decreased to EUR 4,8 Million (6,2 Million) and adjusted EBITDA to EUR 5,0 Million (7,2 Million). Reported adjustments totaled to EUR 0,3 (1,0 Million) including one-offs regarding restructuring costs in the businesses in Finland, EUR 0,25 Million and other nonrecurring costs, EUR 0,05 Million. Impact of the adjustments to the operating cashflow in Q1-Q3 amounted to EUR 0,3 Million (0,75 Million).

Q1-Q3 net cash from operating activities was EUR 1,6 Million (10,5 Million) due to weaker business performance, some negative net working capital changes and other nonrecurring financial items. Net change in cash and cash equivalents in the period was EUR 2,6 Million (6,3 Million).

 

Events after the reporting period

 

The Group companies HLRE Group Ltd, Vesivek Ltd, Vesivek Salaojat Ltd and Vesivek Tuotteet Ltd initiated a process for change negotiations regarding potential temporary layoffs of less than 90 days. These negotiations  scheduled to take place on November 20th 2024 and concerned all employees of the group companies listed above. The payroll function within the HLRE Group Ltd. is excluded from these negotiations.

 The negotiations officially commenced on November 26th, 2024.

 The purpose of the change negotiations was to address plans for potential temporary adjustment measures and their possible personnel impacts. These measures were being considered in response to anticipated seasonal fluctuations that may result in a decline in volume, as well as to safeguard financial profitability during the Q4/Q1 financial periods. The negotiations will focus on the rationale for the proposed measures, their potential impacts, and possible alternative solutions.

 

 

Outlook for the financial year 1 February 2024 – 31 January 2025

No outlook for the financial year 1 February 2024 – 31 January 2025.

 

 

Risks and uncertainties

The Group's revenues and operating profit are affected by general economic conditions, which are, in turn, influenced by many factors beyond the Group's control. The Group currently operates in Finland and Sweden. Currently, the majority of the Group's operations are located in Finland but growth in both markets, for example, by way of increasing market share and/or expanding the Group's product and service offering is an important factor in fulfilling the Group's strategic objectives. Respectively, the Group's revenue and operating profit are particularly susceptible to general economic conditions and perception of future general economic conditions in the Finnish and Swedish markets.

Uncertainty or adverse trends in general economic conditions could affect the Group's business and demand for the Group's products and services through, inter alia, affecting consumer confidence as well as through adverse impacts on the business activities of the Group's corporate clients purchasing the Group's rainwater systems and roof safety products. Importantly, the general economic conditions may adversely affect the level and cost of financing available to the Group's consumer and corporate clients to make investments in renovations and refurbishments. Moreover, increases in the costs of financing and decreases in the level of available financing may adversely affect the Group's ability to make investments and fulfil its strategic objectives and may have a material adverse effect on the Group's business, financial position and results. Through its manufacturing operations, the Group is furthermore exposed to the risk of fluctuations in certain commodity prices (such as steel, aluminium and wood) and energy prices (especially through fuel costs for vehicles) and increases in prices due to economic disruptions and changes in general market conditions may have an adverse effect on the Group's business, financial position and results. All of the factors mentioned above could harm the Group's operations and the Group cannot predict the ways in which the future economic environment and market conditions may affect the Group's operations.

In general, the frequency of accidents at construction sites is worth noticing and the Group operates in a business segment subject to extensive laws and regulations regarding the work environment. Despite required health and safety measures and, for example, the use of scaffoldings on its construction sites improving the safety of the personnel, the Group is exposed to the risk of, possibly even fatal, accidents at the workplace especially on its roof renovation sites but also at its manufacturing facilities. In addition to physical injuries, employees of the Group are exposed to risks related to hazardous substances as certain of the Groups renovation sites contain asbestos. Respectively, the Group must also comply with specific environmental regulations with respect to asbestos. Finnish legislation includes particularly stringent requirements for any activities involving asbestos and the safety requirements for such activities. Any failure to comply with the regulations concerning health and safety or asbestos related activities may result in liability for the Group and/or the Group’s permit being revoked. For example, if Group’s permit to handle asbestos would be revoked, the Group would need to stop all business activities relating to handling of asbestos and acquire the work through subcontractors. Moreover, all potential accidents and health impacts have an adverse effect on its personnel's well-being. The Group as an employer is exposed to the risks related to health and safety issues of its employees possibly resulting in reduced working capacity of employees.

The Group may, in the future, become in breach of financial covenants and other obligations in its financing agreements that constitute grounds for termination or acceleration. A failure by the Group to obtain necessary capital in the future, or obtaining financing on less favourable terms, may have an adverse effect on the Group's business, financial position and results.

 

 

For more information

Jari Raudanpää, CFO

+358 40 566 6399

jari.raudanpaa@vesivek.fi

 

HLRE Holding Group
2611405-7
Consolidated Statement of Comprehensive Income
1000 EUR	1.8.-31.10.2024	1.2.2024-31.10.2024	1.8.-31.10.2023	1.2.2023-31.10.2023	1.2.2023-31.1.2024
REVENUE	33 636	79 295	35 420	87 838	108 161
Other operating income	-244	769	633	1 469	1 330
Material and services	-12 852	-29 877	-13 225	-31 743	-39 864
Employee benefits expense	-11 629	-31 092	-12 648	-35 484	-46 487
Depreciation and amortisation	-1 693	-5 265	-2 228	-6 004	-12 810
Other operating expenses	-5 319	-14 402	-5 349	-15 914	-21 001
OPERATING PROFIT	1 900	-572	2 603	162	-10 671
Finance income	18	931	41	1 279	259
Finance cost	-1 134	-3 526	-1 185	-3 485	-4 635
Finance income and expense	-1 116	-2 595	-1 144	-2 206	-4 376
PROFIT/LOSS BEFORE TAX	783	-3 166	1 459	-2 044	-15 047
Tax on income from operations	-203	357	-397	201	1 769
PROFIT/LOSS FOR THE PERIOD	580	-2 810	1 061	-1 843	-13 278
Profit attributable to:
Owners of the parent company	489	-2 681	874	-1 960	-13 113
Non-controlling interests	91	-129	188	117	-165
	580	-2 810	1 061	-1 843	-13 278
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations	-11	-61	-58	-91	12
Items that may be reclassified subsequently to profit or loss	-11	-61	-58	-91	12
TOTAL COMPREHENSIVE INCOME	569	-2 870	1 003	-1 934	-13 266
Total comprehensive income attributable to:
Owners of the parent company	479	-2 736	821	-2 043	-13 102
Non-controlling interests	90	-134	182	109	-164
	569	-2 870	1 003	-1 934	-13 266

 

HLRE Holding Group
2611405-7
Consolidated Statement of Financial Position
1000 EUR	31.10.2024	31.10.2023	31.1.2024
ASSETS
NON-CURRENT ASSETS
Goodwill	35 273	40 304	35 273
Intangible assets	609	955	685
Property, plant, equipment	22 405	22 598	26 263
Other non-current financial assets	48	48	48
Loan receivables	6	15	13
Deferred tax assets	2 740	799	1 940
NON-CURRENT ASSETS	61 080	64 720	64 221
CURRENT ASSETS
Inventories	11 855	13 802	12 833
Trade and other receivables	9 672	9 756	6 261
Loan receivables	49	52	52
Income tax receivable	756	393	713
Cash and cash equivalents	5 125	9 890	2 574
CURRENT ASSETS	27 457	33 893	22 433
ASSETS	88 536	98 613	86 654
EQUITY AND LIABILITIES
Owners of the parent company
Share capital	80	80	80
Reserve for invested unrestricted equity	18 002	18 002	18 002
Translation differences	-193	-234	-140
Retained earnings	-6 355	7 471	-3 599
Owners of the parent company	11 534	25 403	14 343
Non-controlling interests	-175	181	-91
EQUITY	11 358	25 584	14 252
NON-CURRENT LIABILITIES
Finance and lease liabilities	54 349	22 304	10 738
Employee benefit obligation	400	427	400
Deferred tax liabilities	253	226	105
NON-CURRENT LIABILITIES	55 002	22 956	11 243
CURRENT LIABILITIES
Finance and lease liabilities	5 045	29 921	42 066
Other current liabilities	16 973	17 978	17 098
Derivatives	0	1 930	1 852
Income tax liabilities	158	244	143
CURRENT LIABILITIES	22 176	50 073	61 159
Liabilities	77 178	73 029	72 401
EQUITY AND LIABILITIES	88 536	98 613	86 654

 

HLRE Holding Group
2611405-7
Consolidated Statement of Cash Flows, indirect
1000 EUR	1.8.2024-31.10.2024	1.2.2024-31.10.2024	1.8.2023-31.10.2023	1.2.2023-31.10.2023	1.2.2023-31.1.2024
Cash flows from operating activities
PROFIT/LOSS FOR THE PERIOD	580	-2 810	1 210	-1 694	-13 278
Adjustments to the profit/loss for the period
Depreciation, amortisation and impairment	1 693	5 265	2 228	6 004	12 810
Financial income and expenses	1 150	3 435	960	2 836	3 801
Tax on income from operations	203	-357	248	-350	-1 769
Other adjustments	-70	-944	-211	-1 111	169
Adjustments total	2 976	7 399	3 226	7 379	15 011
Working capital changes
Increase / decrease in inventories	1 160	918	370	1 894	2 947
Increase / decrease in trade and other receivables	-2 025	-3 484	-348	-14	3 584
Increase / decrease in trade payables	2 049	3 506	4 862	5 506	-541
Interest paid	-387	-1 216	-756	-2 220	-3 030
Interest received	39	116	53	115	192
Other financial items	-115	-2 482	-9	-14	-12
Income taxes paid	-88	-329	-88	-440	-551
Net cash from operating activities	4 191	1 620	8 520	10 511	4 322
Cash flows from investing activities
Purchase of tangible and intangible assets	-144	-427	-273	-1 041	-999
Proceeds from sale of tangible and intangible assets	20	648	-347	516	587
Acquisition of subsidiaries, net of cash acquired	0	-2	0	0	0
Loans granted	0	-1	0	-9	-9
Proceeds from repayments of loans	3	11	4	11	14
Addition / deduction of cash equivalents	-19	-16	-44	-39	0
Net cash used in investing activities	-139	213	-660	-562	-407
Cash flows from financing activities
Purchase of treasury shares	-4	-22	0	0	0
Proceeds from current borrowings	0	976	0	0	0
Proceeds from non-current borrowings	0	3 066	0	0	0
Payment of lease liabilities	-634	-3 302	-766	-3 616	-4 898
Net cash used in financing activities	-638	718	-766	-3 616	-4 898
Net change in cash and cash equivalents	3 414	2 551	7 093	6 333	-983
Cash and cash equivalents, opening amount	1 712	2 574	2 796	3 557	3 557
Net increase/decrease in cash and cash equivalents	3 414	2 551	7 093	6 333	-983
Cash and cash equivalents	5 125	5 125	9 890	9 890	2 574
Cash and cash equivalents, other arrangements	0	0	0	0	0

   

HLRE Holding Group
2611405-7
Consolidated Statement of Changes in Equity
		Attributable to owners of the Company
1000 EUR	Share capital	Reserve for invested unrestricted equity	Translation differences	Retained earnings	Total	Non-controlling interests	Total equity
EQUITY 1.2.2024	80	18 002	-138	-3 601	14343	-91	14 252
Comprehensive income
Profit/loss for the period				-2 681	-2681	-129	-2 810
Other comprehensive income:
Translation differences	0	0	-55	0	-55	-5	-61
TOTAL COMPREHENSIVE INCOME	0	0	-55	-2 681	-2736	-134	-2 870
Transactions with owners
Acquisition of treasury shares	0	0	0	-22	-22	0	-22
Total transactions with owners	0	0	0	-22	-22	0	-22
Changes in ownership interests in subsidiaries
Changes in ownership interest without loss of control				-52	-52	50	-2
TOTAL EQUITY 31.10.2024	80	18 002	-193	-6 355	11 534	-175	11 358

   

	Attributable to owners of the Company
1000 EUR	Share capital	Reserve for invested unrestricted equity	Translation differences	Retained earnings	Total	Non-controlling interests	Total equity
EQUITY 1.2.2023	80	18 002	-151	9 511	27442	71	27 512
Comprehensive income
Profit/loss for the period				-1 960	-1 960	117	-1 843
Other comprehensive income:
Translation differences	0	0	-84	1	-83	-8	-91
TOTAL COMPREHENSIVE INCOME	0	0	-84	-1 959	-2043	109	-1 934
Other changes	0	0	0	4	4	2	6
Total transactions with owners	0	0	0	-81	4	2	6
Changes in ownership interests in subsidiaries
TOTAL EQUITY 31.10.2023	80	18 002	-234	7 471	25403	181	25 584

       

Use of Alternative Performance Measures

Alternative Performance Measures (APM) are financial measures of historical or future financial  performance,  financial  position,  or  cash  flows,  other  than  financial  measures defined  or specified  in  the  applicable  financial  reporting  framework.  HLRE Group reports  the  financial  measures [Gross profit], [Gross margin] and [Adjusted EBITDA] in its quarterly  reports,  which  are not  financial  measures  as  defined  in  IFRS. The Group believes that the alternative performance measures provide significant additional information on HLRE’s results of operations, financial position and cash flows The APMs  are  used  consistently  over  time  and  accompanied  by  comparatives  for  the previous periods.

Gross profit= Revenues – cost of goods sold

Gross margin (%) = Gross profit in relation to Revenue

EBITDA = Operating profit (EBIT) + Depreciation + Amortization

EBITDA % = EBITDA in relation to Revenue

Adjusted EBITDA = EBITDA - EBITDA Adjustments

Adjusted EBITDA % = (EBITDA - EBITDA Adjustments) / Revenue

Operating profit (EBIT) % = Operating profit in relation to Revenue

EBITDA adjustments = One-offs regarding restructuring costs and other non-recurring costs