Eltel Group: Full-year report January–December 2020

October–December 2020

  • Net sales EUR 229.2 million (278.9). Total growth -17.8% and organic growth1) in Power and Communication -11.1%
  • Operative EBITA2) EUR 4.0 million (-14.9) and operative EBITA margin 1.7% (-5.3)
  • Items affecting comparability EUR -5.7 million (1.4) include valuation of net assets held for sale
  • Operating result (EBIT) EUR -1.9 million (-13.7) and EBIT margin -0.8% (-4.9)
  • Net result EUR -7.0 million (-11.8)
  • Earnings per share EUR -0.05 (-0.08), basic and diluted
  • Cash flow from operating activities EUR 51.2 million (65.0)

January–December 2020

  • Net sales EUR 938.0 million (1,087.6). Total growth -13.8% and organic growth1) in Power and Communication -7.4%
  • Operative EBITA2) EUR 11.4 million (-11.3) and operative EBITA margin 1.2% (-1.0)
  • Items affecting comparability EUR 14.1 million (1.6) include gain/loss from divested and held for sale businesses
  • Operating result (EBIT) EUR 24.8 million (-11.2) and EBIT margin 2.6% (-1.0)
  • Net result EUR 5.3 million (-25.1)
  • Earnings per share EUR 0.03 (-0.17), basic and diluted
  • Cash flow from operating activities EUR 49.4 million (51.4)
  • Net debt3) EUR 67.4 million (123.8)

Significant events during the fourth quarter

  • Eltel signed five contracts of significance to a combined value up to about EUR 470 million.
  • In December 2020, Eltel’s financing agreements were extended by one year until Q1 2023.
  • Eltel announced that it will launch a new segment structure in the financial reports starting with the January-March 2021 interim report.

Financial guidance

Eltel expects the full-year 2021 operative EBITA margin to increase compared to 2020.

EUR million Oct-Dec 2020 Oct-Dec 2019 Change, % EUR million Jan-Dec 2020 Jan-Dec 2019 Change, %
Net sales Net sales
Power 84.4 93.0 -9.2   Power 329.8 377.7 -12.7
Communication 143.5 182.9 -21.5   Communication 594.9 698.4 -14.8
Other 1.3 3.2 -59.9   Other 13.3 13.2 0.8
Total Group 229.2 278.9 -17.8 Total Group 938.0 1 087.6 -13.8
Operative EBITA2) Operative EBITA2)
Power -2.4 -12.0 80.1   Power -9.5 -17.5 45.8
Communication 6.4 2.0 216.4   Communication 24.4 18.1 34.4
Other 1.7 -0.6 N/A   Other 4.5 -0.8 N/A
Items not allocated4) -1.8 -4.2 57.8   Items not allocated4) -8.0 -11.2 28.7
Operative EBITA, Group 4.0 -14.9 126.7 Operative EBITA, Group 11.4 -11.3 201.3

1) Adjusted for divested operations and currency effects.
2) Eltel follows the profitability of segments with Operative EBITA. Please see page 23 for definitions of the key ratios.
3) Refers to net debt as defined in financing agreement. See page 9 for calculation.
4) Items not allocated to operating segments consist of Group management and support function.

Comments by the CEO

We are pleased to report that our operational performance continued to improve during the fourth quarter, leading to a positive operative EBITA for the full year of 2020. This is a proof for us that we are on track with our transformation journey.

Our Operational Excellence strategy has driven our financial and operational turnaround. We have made improvements in all parts of our business, and transformed Eltel into a stable company with a Nordic focus and country-based operations supported by a lean Group organisation.

For the quarter, our operative EBITA improved by almost EUR 20 million to EUR 4.0 million (-14.9), or 1.7% (-5.3) of net sales. Cashflow from operating activities was good, reflecting the seasonal production build-up pattern. Furthermore, our net working capital at year-end was EUR -25.4 million, a historical low, and we were able to further reduce our net debt.

Full year operative EBITA was EUR 11.4 million (-11.3) and improved in both segments.

Despite improving for the full year, the operative EBITA in the Power segment is still far from our targeted levels. We are still facing challenges in the Polish High Voltage market. In Sweden the work to ramp down operations continues, and we are in the process of completing several loss-making projects. On the positive side, the risk level in Finland has been reduced upon the completion of certain Build projects that caused write-downs during the year. We see a good productivity development throughout the Finnish operations as well as increased net sales due to several contract expansions with our key customers. In the Power segment overall, we have continued to take steps to increase project control and reduce risk.

In the Communication segment, we can see that the work done in Sweden in 2020 to improve project execution and control is starting to impact the results in a positive way. However, Sweden is still in the beginning of its journey to reach the targeted operative EBITA margins. Norway delivered good margins thanks to efficiency actions, rightsizing and improved project profitability. After a decrease in customer investments due to COVID-19 in 2020, we can see that going forward the volumes in Norway are stabilising. In Finland, both net sales and operative EBITA have improved with high market share and good volumes in fibre and 5G rollouts. Denmark performed in line with the previous year, although falling slightly behind during the second half of the year.

This is the last time we report the current Power and Communication segments. Starting from the Q1 2021 interim report, the Power and Communication segments will be replaced by four country segments. We believe the change will reduce complexity and in a more balanced and transparent way reflect Eltel’s performance and organisational set up.

When reflecting upon 2020, I am grateful for what we have accomplished during this challenging and different year:

  • We signed several large and important frame agreements, which confirms our position as the leading Nordic field service company. This provides a strong platform to build on in 2021 and beyond.
  • We successfully implemented initiatives to promote operational efficiency – primarily improve production planning, optimise route planning and technician utilisation.
  • We divested our German Communication business and the Swedish business area Aviation & Security, which has strengthened the Nordic focus as well as contributed to the lower net debt.
  • We benefited from our efforts to strengthen our balance sheet by improving net working capital and nearly halving net debt.
  • We made good progress with our sustainability work, especially on our main safety indicator: lost-time injury frequency, which now is at a market-leading level in our industry. We also succeeded in reducing our carbon footprint.

In 2020, we saw a moderate impact from the COVID-19 pandemic on our business. We have mainly experienced delays in project execution and lower investment levels by certain customers, which is foreseen to continue in 2021.

Entering 2021, we see a harsh winter, which strengthens the seasonality that is typical for our business. We will also still be negatively impacted by a number of old unprofitable projects, but the majority of them will be completed during the year. However, improved control and a continued good market situation, driven by fibre and 5G, gives me the confidence to say that we will further strengthen our performance going forward. Highlighting this, we will introduce financial guidance for the year, stating that we foresee our operative EBITA margin for 2021 to improve from 2020.

Encouraged by the progress made during the year, we have updated our targets for key financial indicators and aim to achieve them by the end of 2023.

I want to thank all our employees for their hard work and commitment, as well as our customers and other stakeholders for their trust in us in 2020.

Casimir Lindholm, President & CEO

For further information, please contact:
Saila Miettinen-Lähde, CFO
Phone: +358 40 548 3695, saila.miettinen-lahde@eltelnetworks.com

Elin Otter, Director, Communications and Investor Relations
Phone: +46 72 59 54 692, elin.otter@eltelnetworks.com

This information is information that Eltel AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08.00 CET on 18 February 2021.

About Eltel
Eltel is a leading Nordic field service provider for power and communication networks. We deliver a comprehensive range of solutions – from maintenance and upgrade services to project delivery. This includes design, planning, building, installing and securing the operation of power and communication networks for a more sustainable and connected world today and for future generations. In 2020, Eltel had annual sales of EUR 938.0 million. The total number of employees currently stands at around 5,400. Eltel AB is listed on Nasdaq Stockholm.