Eltel Group: Interim report January–June 2018
Group net sales decreased 10.4% to EUR 295.5 million (329.8), mainly as a result of divestments and on-going discontinuation of non-core operations, in line with the transformation strategy
Net sales in the Core business, including segment Power and segment Communication, decreased 3.1% to EUR 293.8 million (303.2). The decrease is mainly explained by divestments of operations in Poland and the Baltics
Net sales in the Core business adjusted for divested operations and currency effects increased 4.5%
Discontinuation of non-core operations in Other led to a planned net sales decrease of 90.5% to EUR 2.5 million (26.8), in line with the transformation strategy
Group operative EBITA* amounted to EUR 2.0 million (-21.0) and Core operative EBITA* EUR 9.7 (5.3) million
EBIT amounted to EUR 1.6 million (-23.2)
Net result amounted to EUR 0.2 million (-24.5)
Earnings per share were EUR 0.00 (-0.23)
Operative cash flow* was EUR -17.3 million (-10.7)
Casimir Lindholm was appointed as Eltel’s new President & CEO effective 1 September 2018. He will succeed Håkan Kirstein, who will leave his role after having finalised the first phase of the transformation strategy. Håkan Kirstein will remain in his position as President & CEO until Casimir Lindholm starts
The Board of Directors has come to the conclusion that it is not commercially justified to initiate a damages claim against the former CEO and Chairman or to pursue actions to recover damages against previous Directors or sellers due to disclosure of information during the company’s initial public offering in 2015
Group net sales decreased 10.4% to EUR 562.2 million (627.6), mainly as a result of divestments and on-going discontinuation of non-core operations, in line with the transformation strategy
Net sales in the Core business, including segment Power and segment Communication, decreased 4.3% to EUR 551.8 million (576.7). The decrease is mainly explained by divestments of operations in Poland and the Baltics
Net sales in the Core business adjusted for divested operations and currency effects increased 3.1%
Discontinuation of non-core operations in Other led to a planned net sales decrease of 76.5% to EUR 12.1 million (51.4), in line with the transformation strategy
Group operative EBITA* amounted to EUR -5.7 million (-30.7) and Core operative EBITA* EUR 9.5 million (9.5)
EBIT amounted to EUR -8.8 million (-183.0)
Net result amounted to EUR -9.3 million (-185.9)
Earnings per share were EUR -0.06 (-1.76)
Operative cash flow was EUR -54.9 million (-77.1)
Decision in January 2018 to implement country-based organisation for segments Power and Communication – expected reduction of cost level approximately EUR 3 million annualised from 2019
Unless otherwise stated, figures in brackets refer to the same period in the preceding year
*Please see page 20 for definitions of the key ratios
Significant events after the end of the reporting period
An agreement to divest the Norwegian rail operations was signed. Eltel’s rail operations in the Norwegian market generated net sales of EUR 13.1 million in 2017 and an EBITA of EUR -4.7 million. The transaction price was EUR 1. The expected cash flow effect is EUR -0.7 million, expected to occur in the third quarter of 2018 in connection with the completion of the transaction.
Following conclusion of the first phase of the transformation strategy Eltel has reached agreement with its banks to revise current facilities and prolong those with one year until 2021
|EUR million||Apr-Jun 2018||Apr-Jun 2017||Change, %||EUR million||Jan-Jun 2018||Jan-Jun 2017||Change, %|
|Net sales||Net sales|
|Total Group||295.5||329.8||-10.4||Total Group||562.2||627.6||-10.4|
|Operative EBITA**||Operative EBITA**|
|Items not allocated||-4.5||-4.6||1.6||Items not allocated||-8.3||-8.4||1.1|
|Total Group||2.0||-21.0||109.3||Total Group||-5.7||-30.7||81.5|
* Core includes segments Power and Communication **
Please see page 20 for definitions of the key ratios
Comments by the CEO
Positive progress in Core business
In the second quarter, we started to see signs of a turnaround in our Core business, partly as a result of the change process we executed, and partly as a result of production being high after a harsh winter. Adjusted for divested operations and currency effects, net sales increased by 4.5% in the second quarter, and by 3.1% in the first half-year, in year-on-year terms. At the same time, the operative EBITA of the Core business was up by EUR 4.4 million to EUR 9.7 million in the second quarter, while it for the first half-year was in line with previous year, amounting to EUR 9.5 million.
Operative EBITA for the Group overall also improved, from EUR -21.0 million in the second quarter of the previous year, to EUR 2.0 million in the second quarter 2018, and from EUR -30.7 million to EUR -5.7 million in the first half-year 2018. This progress confirms that step by step, operations are heading in the right direction, even if in terms of achieving Eltel’s intended profitability, the work has just begun.
Segment Power increased net sales in the second quarter, and for the whole period, adjusted for the sold operations in the Baltics and currency effects. Net sales were negatively impacted by ramp-down of some old contracts in Sweden, lower sales in Finland as an effect of changed project mix and some delayed projects. However, Smart Grids made very positive progress again in the second quarter, with a significant increase in sales with high profitability. Operative EBITA was positive, and up on the previous year, both in the second quarter and for the period. The market conditions for Power remain robust, with good potential for healthy growth and profitability as old, unprofitable projects are finalised.
Segment Communication also increased net sales in the second quarter and the first six months of the year, adjusted for the sold operations in Poland and currency effects. Overall, good sales performance in Sweden, Finland and Denmark compensated for the project delays we experienced in Norway resulting from earlier, extreme weather conditions in the winter.
Operative EBITA was higher than in the second quarter of the previous year, but somewhat lower for the whole period due to the adverse weather conditions in the first quarter. Work on increasing efficiency through improved resource planning, monitoring and new IT tools remain in focus for the segment.
We signed an agreement to divest the loss-making rail operations in Norway after the end of the period. This sale means that all non-core businesses intended to be sold now have been sold in accordance with the strategic direction we decided on in spring 2017.
Now that the first phase of our transformation process is complete, our focus is on continuing to develop with full force our Core business. A long-term strategy to ensure sustainable growth and profitability will be presented during the fall.
I would like to take this opportunity to thank all my colleagues in the Group, who for the past year and a half, have been working hard to execute the rapid transformation of Eltel, which we launched a short time after I became CEO in fall 2016. Eltel is now a more stable company and is in a good position to successfully develop well going forward.
Håkan Kirstein, President & CEO
For further information, please contact:
Håkan Kirstein, CEO
tel. +46 72 23 06 944, firstname.lastname@example.org
Petter Traaholt, CFO
tel. +46 72 59 54 749, email@example.com
Eltel AB discloses the information provided herein pursuant to the EU’s Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the above contacts, on 9 August 2018 at 08:00 a.m. CET.
Eltel is a leading Northern European provider of technical services for critical infrastructure networks – Infranets – in the segments of Power, Communication and Other, with operations throughout the Nordics, Poland and Germany. Eltel provides a broad and integrated range of services, spanning from maintenance and upgrade services to project deliveries. Eltel has a diverse contract portfolio and a growing customer base of large network owners. In 2017, Eltel’s net sales amounted to EUR 1.3 billion. The current number of employees is approximately 7,600. Since 2015, Eltel AB is listed on Nasdaq Stockholm.