Solar A/S disposed of its subsidiary Aurora Group Danmark A/S as of 24 April 2013. Thus, 2012 and 2013 figures in this announcement relate to the continuing operations only.
Solar Group revenue and EBITA for Q3 2013 fell short of our expectations, and we are adjusting expectations for 2013 downwards. Solar 8000 roll-out in Solar Danmark was done without significant interruptions so far.
Group CEO Flemming H. Tomdrup says: ”This quarter was characterised by negative growth in three of our four key markets which made it difficult to strengthen earnings. Consequently, we continue to adjust cost levels to current market development. As was the case in Q2, we generated positive cash flow from operating activities and reduced our debt further.”
| Selected key figures (€ million) | Q3 2013 | Q3 2012 | Q1-Q3 2013 | Q1-Q3 2012 |
| Revenue | 368.3 | 387.3 | 1,127.7 | 1,202.2 |
| EBITA | 9.5 | 11.7 | 7.9 | 23.8 |
| Earnings before tax | 5.6 | 8.0 | (4.3) | 13.1 |
| Cash flow from operating activities | 18.9 | 3.1 | (4.6) | 11.1 |
| Selected financial ratios (%) | ||||
| Organic growth | (3.0) | (2.0) | (6.1) | 1.5 |
| EBITA margin | 2.6 | 3.0 | 0.7 | 2.0 |
| Net working capital/past 12 months’ revenue* | 13.6 | 14.1 | 13.6 | 14.1 |
* Calculated as an average of the last four quarters’ inventories, trade receivables and trade payables.
Revenue in Q3 2013:
- Group-wide revenue fell short of our expectations.
- Revenue growth was -4.9% against 14.1% in Q3 2012.
- Organic growth was -3.0% and -4.5% when adjusted for number of working days in Q3 2013.
EBITA in Q3 2013:
- EBITA for the group failed to meet our expectations.
- EBITA for continuing operations was impacted by restructuring costs of € 0.8m. No restructuring costs were expensed in Q3 2012.
- As expected, EBITA was also negatively impacted by Solar 8000 costs of € 0.9m against € 1.1m in Q3 2012.
Net working capital:
- Net working capital was down at € 205.7m from € 257.3m at the end of Q3 2012 when Aurora Group was included with € 13.2m.
- Efforts to reduce net working capital will continue. Our target is for net working capital stated as an average of 4 quarters to be below 14% of revenue in 2013.
Expectations for 2013:
- Based on earnings performance in Q3 and changed expectations for market development in Norway and Denmark, Solar adjusts its expectations for 2013 downwards.
- Previously, we expected to generate revenue of € 1,570-1,620m and EBITA in the lower part of the € 25-33m range. We now expect revenue of € 1,530m and EBITA of € 18m. The above expectations have been translated at the current exchange rates.
- Expectations for EBITA 2013 include restructuring costs of approximately € 6m and Solar 8000 implementation costs of approximately € 4m. Adjusted for these, normalised EBITA is expected at € 28m.
- Revenue expectations equal organic growth of approximately -7%.
- As a result of the negative market trends, we implemented restructuring measures in several group enterprises, and further restructuring is planned. Consequently, total restructuring costs for the year will be approximately € 6m. The full-year effect of implemented as well as planned restructuring measures will total approximately € 11m, all things being equal.
Solar 8000 (SAP):
- Roll-out of Solar 8000 in Solar Danmark was done in the first weekend of November. We have not seen any significant interruptions but continue to monitor the situation closely. Roll-out in Solar Sverige is expected in some five months.
- We expect the overall investment in Solar 8000 to total approximately € 54m.
- We will maintain our expectations for positive effects, still expecting the transition to Solar 8000 to increase earnings (EBITDA) by € 8-10m annually when the system is fully implemented.
Assessment of capital structure:
- Due to the weak financial results in 2013, Solar’s Supervisory Board has decided that no extraordinary dividends will be distributed in the period until the next annual general meeting.
- We generate positive cash flow from operating activities and manage to reduce our debt continuously. Therefore, the Supervisory Board will consider recommending that the annual general meeting adopt a proposal for the distribution of dividends that exceeds Solar’s target of 35-45% of this year’s net results.
Expectations for 2014:
- The wholesaling market is characterised by weak growth in these years, and with negative growth rates in several markets we are facing difficult market conditions. Experience has taught us that, traditionally, we see the effects of any upturn quite late. As announced in the quarterly report for Q2, we will hold off announcing our expectations for 2014 until the publication of our Annual Report 2013. We also expect to release an update of our financial objectives for 2014-2015 at this time.
Q3 presentation - webcast and teleconference today The presentation of quarterly report Q3 2013 will be made from NASDAQ OMX Copenhagen today at 11.00 CET, and an online webcast in English will be accessible via www.solar.eu . It will be possible to participate via a teleconference option - please use these numbers to participate:
Callers from Denmark: tel. +45 32 72 80 18 Callers from Great Britain: tel. +44 145 255 5131 Callers from the USA: tel. +1 866 682 8490 International callers: tel. +44 (0) 145 255 5131
Yours faithfully,
Solar A/S Flemming H. Tomdrup
Appendix: Quarterly report Q3 2013, pages 1-27
Solar facts Solar A/S was established in 1919 and listed on the Copenhagen Stock Exchange in 1953. Solar is one of Northern Europe’s leading technical wholesalers within electrical, heating, plumbing and ventilation products. The group, based in Kolding, Denmark, has subsidiaries in Denmark incl. the Faroes, Sweden, Norway, the Netherlands, Belgium, Germany, Poland and Austria. In 2012, Solar Group revenue totalled € 1,700.9m, equating DKK 12.7bn. The group currently has some 3,500 employees.
For more information, please visit www.solar.eu .
Disclaimer This announcement was published in Danish and English today via NASDAQ OMX Copenhagen. In case of any discrepancy between the two languages, the Danish version shall prevail.
