KH Group Plc’s Half-Year-Report 1 January–30 J

KH Group Oyj Stock Exchange Release 16 August 2024 at 8:00 am

KH Group Plc’s Half-Year-Report 1 January–30 June 2024

Progress in line with strategy; business performance mainly positive

This is the summary of the Half-Year Report for January–June 2024. The full Half-Year Report is attached to this release and is also available on the company’s website at www.khgroup.com .

KH Group, April-June 2024, pro forma  

• Net sales amounted to EUR 89.3 (93.2) million.
• Operating profit was EUR -0.3 (0.2) million.
• The net sales of KH-Koneet were slightly better than in the comparison period and operating profit remained unchanged compared to the comparison period.
• Indoor Group’s net sales declined significantly and operating profit was below the level of the comparison period.
• NRG’s net sales and operating profit increased significantly year-on-year.
• KH Group divested its holdings in HTJ.
• Ville Nikulainen started as the Group CEO and Tommi Rötkin as CFO on 1 June 2024.

KH Group January–June 2024, reported IFRS  

• Net sales amounted to EUR 167.4 (67.2) million. The figure for the comparison period includes net sales accumulated in May–June 2023 and HTJ is classified as a discontinued operation retroactively.
• Operating profit was EUR -1.8 (-9.9) million.
• Net profit for the period was EUR -6.2 (-5.4) million.
• Earnings per share (undiluted and diluted) were EUR -0.07 (-0.06).
• Equity per share at the end of the review period was EUR 1.25 (1.51).
• Return on equity for rolling 12 months was -18.9% (-10.5%).
• The Group’s cash and cash equivalents amounted to EUR 4.1 million at the end of the review period.
• Gearing at the end of the review period was 239.6% (180.3%).
• Gearing excluding lease liabilities was 153.8% (109.7%).

CEO Ville Nikulainen:

"I started as CEO of KH Group and Tommi Rötkin as CFO on 1 June 2024. The implementation of KH Group’s strategy change has progressed as planned and we divested HTJ in June–July 2024. HTJ and the entries related to its divestment are reported as a discontinued operation. The debt-free selling price was EUR 23.0 million, with KH Group’s share after the net debt and expenses arising from the sale amounting to EUR 13.1 million. The cash proceeds from the sale were used to pay back the parent company’s bank loan in full after the end of the review period, and the proceeds will also be used for measures required by the change in strategy.

Our consolidated pro forma net sales and operating profit declined significantly year-on-year. KH-Koneet's net sales increased moderately and operating profit was at the same level as in the comparison period. The Finnish and Swedish businesses were close to each other in terms of net sales and operating profit. 

General market uncertainty, industrial action in Finland and the deployment of Indoor Group’s new ERP system have a negative impact on Indoor's net sales and operating profit. The Asko and Sotka chains both lost net sales and consequently profitability. According to the Federation of Finnish Special Commodity Trade ETU’s statistics, net sales in the furniture market has declined by approximately 8% year-on-year, and Indoor’s own development continued in the same direction throughout the quarter. Both chains continue 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. The new ERP system was deployed in Sotka on 1 March 2024 and in Asko on 1 May 2024.

Nordic Rescue Group’s pro forma net sales and operating profit improved significantly year-on-year. The demand for rescue vehicles in Finland and Sweden has remained at a good level, and production capacity for 2024 has already been sold out.

During the financial period, we will continue our development efforts across our business areas, many of which are focusing on securing net sales and consequently operating profit as well as ensuring operational efficiency. We will continue to move forward with KH Group’s change in strategy as planned.

On 9 August 2024, the company updated its earlier guidance on net sales and operating profit for 2024. The downward revision of the guidance is based on Indoor Group’s lower than expected net sales and operating profit in both the first and second half of 2024. According to the updated guidance, the company estimates, with the current Group structure, to reach pro forma net sales of EUR 340–360 million and operating profit of EUR 4–7 million in 2024.

Financial performance

KH Group, Pro forma key figures

The accounting principles applied in preparing the pro forma figures and reconciliations with the reported figures are presented below in the report under “Pro forma financial information”.

(1) EBITDA = operating profit + depreciation and amortisation                 

KH Group, April–June, pro forma

KH Group’s pro forma net sales amounted to EUR 89.3 (93.2) million, representing a year-on-year decline of 4.2%. Net sales increased in KH-Koneet and Nordic Rescue Group and decreased in Indoor Group. Operating profit for the review period came to EUR -0.3 (0.2) million. KH-Koneet and Nordic Rescue Group had positive operating profit, while Indoor Group recorded a loss. The parent company's share of the operating profit for the review period was EUR -0.6 (-0.8) million. The factors contributing to the parent company’s decreased operating expenses included the strategy change project under way in the comparison period and savings in fixed expenses.

KH Group, January–June, pro forma

KH Group’s net sales decreased by -10.6% to EUR 167.4 (187.3) million. Net sales increased in Nordic Rescue Group and decreased in KH-Koneet and Indoor Group Operating profit was positive in KH-Koneet and Nordic Rescue Group, but negative in Indoor Group. Of the segments, Nordic Rescue Group managed to improve its operating profit year-on-year.The parent company’s share of the operating profit for the review period was EUR -1.0 (-1.4) million. The factors contributing to the parent company’s decreased operating expenses included the strategy change project under way in the comparison period and savings in fixed costs .

Events after the review period

At the end of the review period, the parent company had a bank loan of EUR 4.4 million. The bank loan was repaid in full after the review period, at the beginning of July, using the cash obtained from the divestment of HTJ. Following the payment of the loan, the Group’s parent company does not have any debt-related loans from financial institutions, but it has a EUR 2.45 million credit facility at its disposal.

During the current year, the company will continue to implement measures aimed at improving profitability. KH Group announced this with a separate release on 15 August 2024.

Future outlook

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 the 2023 Financial Statements Release published on 21 March 2024, the company estimated net sales of EUR 400–420 million and operating profit of EUR 14–16 million for 2024. The guidance did not include the operating profit of approximately EUR 3.7 million from Indoor Group’s real estate sale transaction in Estonia, which the company announced on 21 March 2024 at 12 noon.

The company updated its earlier guidance on net sales and operating profit for 2024 on 30 April 2024. KH Group estimated, with the then Group structure, to reach net sales of EUR 400–420 million and operating profit of EUR 12–16 million in 2024, including the capital gain from Indoor Group’s Estonian real estate sale transaction.

On 7 June 2024, the company updated its previously issued guidance in connection with the divestment of HTJ. Following the effects of the divestment, KH Group’s pro forma guidance for 2024 is as follows: net sales of EUR 370–390 million and operating profit of EUR 9–13 million including the capital gain from Indoor’s property sale in Estonia. The guidance has thus been updated only by removing HTJ's pro forma figures' share of the net sales and operating profit for the financial period. Going forward, HTJ's result for the financial period 2024 and the Group's capital gain will be reported as discontinued operations.

On 9 August 2024, the company updated its earlier guidance on net sales and operating profit for 2024. According to the updated guidance, with the current Group structure, the company estimates pro forma net sales for 2024 to be EUR 340–360 million and operating profit to be EUR 4–7 million. 

Results presentation webcast

KH Group will organise a webcast in Finnish for analysts, investors and the media on 16 August 2024 at 1:00 pm EEST. You can follow the live webcast at https://khgroup.videosync.fi/q2-2024 The webcast recording and the presentation material will be available on KH Group’s website later on the same day.

KH GROUP PLC

FURTHER INFORMATION: CEO Ville Nikulainen, tel. +358 400 459 343

DISTRIBUTION: Nasdaq Helsinki Ltd Major media www.sievicapital.fi

KH Group Plc is a Nordic conglomerate operating in business areas of KH-Koneet, Indoor Group and Nordic Rescue Group. We are a leading supplier of construction and earth-moving equipment, furniture and interior decoration retailer as well as rescue vehicle manufacturer. The objective of our strategy is to create an industrial group around the business of KH-Koneet. KH Group’s share is listed on Nasdaq Helsinki.

Attachment

• KH Group Plc - Half-Year Report H1_2024