First Quarter 2024 Report
May 15, 2024
Table of Contents | |
Notes to the Condensed Interim Financial Statements | 16 |
Alternative Performance Measures (APMs) | 21 |
2 BORGESTAD ASA
First Quarter 2024 Report
Highlights and Key Figures
Highlights
1
2
3
Significant improved capital efficiency in the Group over the last twelve months with NWC1 reduction of MNOK 52.6.
Höganäs Borgestad Group has increased its adjusted EBIT margin with 1.7 percent over the last twelve months.
Net interest-bearing debt further decreased in the first quarter from MNOK 307 at
31.12.23 to MNOK 293 at 31.03.24. After closing of sale leaseback transaction in Bjuv (expected in 2024), the net interest-bearing debt is estimated at MNOK 152.
4 In first quarter Höganäs Borgestad Group has entered into three maintenance contracts with a total estimated contract value of MNOK 140 - 185.
Key Figures
Q1 | ||||
MNOK | 2024 | 2023 | 2023 | |
Operating income | 223 | 219 | 1 141 | |
EBITDA | 8 | 7 | 127 | |
Depreciation & Impairment of non-current assets | 8 | 7 | 126 | |
Operating profit (EBIT) | 0 | 0 | 1 | |
Profit before tax | -4 | -8 | -37 | |
MNOK | 31.03.2024 | 31.03.2023 | 31.12.2023 | |
Cash | 147 | 80 | 153 | |
Available liquidity at end of period | 209 | 89 | 186 | |
IBD | 440 | 787 | 460 | |
NIBD | 293 | 706 | 307 | |
NIBD/EBITDA LTM | 2,3 | 12,5 | 2,4 | |
Equity ratio | 54 % | 34 % | 38 % |
1 NWC = Net working capital
3 BORGESTAD ASA
First Quarter 2024 Report
About Borgestad ASA
Borgestad ASA is an investment company based in Skien, Norway. Our portfolio primarily covers two main business areas: real estate and refractory.
The Group's focus areas are real estate and refractory industry. Within these segments, it is the shopping mall Agora Bytom and the refractory production and installation company Höganäs Borgestad, that have the biggest impact on the Group's performance. Real estate is the largest segment measured by the balance sheet, while refractory industry is the largest by revenue.
Agora Bytom
Agora Bytom shopping center in Poland is the largest investment of the Group, accounting for over half of the balance sheet. The shopping center has a gross area of 52,000 sqm and more than 30,000 sqm of rental area. Agora Bytom also owns a parking garage with 820 parking spaces that is conveniently connected to the center. Agora Bytom is centrally located in the Silesian region of Poland and holds a strong market position in its primary catchment area. Agora offers spaces to a wide range of tenants, including large international chains and important Polish brands, 8 cinema halls, a fitness center, and a rich selection of cafes.
Höganäs Borgestad
Höganäs Borgestad is a manufacturer and supplier of refractory quality products, installations, systems, and solutions that are essential for industrial high-temperature processes exceeding 1,200°C in various industries such as steel, cement, and aluminum. Refractory materials are stones or masses produced in many different variants depending on their intended use. Refractory materials are primarily used to protect production industries and contribute to energy savings.
4 BORGESTAD ASA
First Quarter 2024 Report
CEO Letter
First quarter of 2024 is left behind and the Group is entering into high season for Höganäs Borgestad. First quarter 2024 has been a further step on the positive trend for Höganäs Borgestad, with continued increase for EBIT margin. First quarter for the refractory business, with the setup of Höganäs Borgestad, is always the quarter with the lowest turnover and margins, due to the season variation in the service and maintenance business in the Nordics.
When comparing adjusted EBIT and net workin capital last twelve months per March 31, 2024 and 2023 the development for Höganäs Borgestad has been transformative for the business, an increase in EBIT margin of 1.7 percent and a decrease in net working capital of MNOK 52.6. We expect further increase in relation to the EBIT margin in the coming periods and review the situation for Höganäs Borgestad as good for further development in 2024.
After a year that saw generally high inflation both in Europe and specifically in Poland, coupled with historically low consumer confidence at the beginning of 2023, sentiment has significantly improved in early 2024. In March 2024, inflation has moderated to 2.0 percent from the high of 16.1 percent recorded in March 2023. Consumer confidence is witnessing a notable uptrend in Poland, reaching its highest point in the past three years. This positive trend aligns with the overall strengthening across all retail sectors and economic fundamentals in Poland, as evidenced by turnover figures in Agora Bytom.
We will work hard to further implement the development strategy within both Höganäs Borgestad and Agora Bytom going forward. Both assets have a good position in their local markets, as local market leaders. The work that has started and always will be the goal, is increasing the trend related to profitability and results. The underlying trends seem good for both assets at the moment.
To summarize, Borgestad has a good underlying start of the year, and we are expecting Höagnäs Borgestad to continue its positive EBIT trajectory further in 2024.
Pål Feen Larsen
CEO
5 BORGESTAD ASA
First Quarter 2024 Report
Operational and Financial Review
Group Results
2024 | 2023 | 2023 | |
(MNOK) | 1st quarter | 1st quarter | 31.12 |
Revenue | 223 | 219 | 1 141 |
Total operating cost | 215 | 212 | 1 014 |
EBITDA | 8 | 7 | 127 |
Depreciation | 8 | 7 | 32 |
Earnings before financial items and tax (EBIT) | 0 | 0 | 1 |
Financial items | -4 | -8 | -39 |
Profit before taxes | -4 | -8 | -37 |
Borgestad Group has shown positive developments in revenue and EBITDA in 2024. For the refractory segment there is an improvement in both revenue and EBITDA, while for real estate there is an increase in revenue but a minor decrease in EBITDA.
Net financials for the Group for first quarter 2024 improved compared to first quarter 2023. The improvement of MNOK 3.9 is based on lower interests and due to materially reduced debt level compared to first quarter 2023.
There is a normal order intake and order backlog for refractory segment at the end of the first quarter of 2024.
Balance Sheet
Numbers in parenthesis are as of December 31, 2023.
As of March 31, 2024, the Group had total assets of MNOK 1,428.8 (1,406.4). Equity amounted to MNOK 765.6 (755.8), representing an equity ratio of 53.5 percent as of March 31, 2024.
The Group's current assets amounted to MNOK
- (463.8). Non-current liabilities was MNOK
- (377.6), while current liabilities amounted
to MNOK 279.3 (273.0), including debt connected with assets held for sale.
The Groups net working capital amounted to MNOK 220.7, compared to MNOK 273.2 per March 31, 2023.
As of March 31, 2024, the Group's total interest- bearing debt is MNOK 440.4 (460.0) and net interest-bearing debt is MNOK 293.2 (307.3). The Group has per March 31, 2024, a sustainable balance sheet, a good cash situation, and are fully financed.
Cash Flow, Investments, and Liquidity
Numbers in parenthesis are as of March 31, 2023.
The Group's cash flow from operating activities was positive at MNOK 27.5 (positive 11.4) in first quarter of 2024.
Cash flow from investing activities was negative at MNOK 0.3 (negative MNOK 8.3), and cash flow from financial activities was negative at MNOK 32.8 (negative MNOK 13.9). As a result, the cash flow for first quarter 2024 was negative at MNOK 5.6 (negative MNOK 10.9).
Available liquidity as of March 31 2024, was MNOK 208.5 (MNOK 88.6).
6 BORGESTAD ASA
Third Quarter 2023 Report | ||||
Real Estate | ||||
2024 | 2023 | 2023 | ||
(MNOK) | 1st quarter | 1st quarter | 31.12 | |
Revenue | 19 | 17 | 69 | |
EBITDA | 9 | 10 | 37 | |
Earnings before financial items and tax (EBIT) | 7 | 8 | -66 |
Following a year marked by high inflation and historically low consumer confidence at the outset of 2023, the sentiment and optimism appear to have improved notably in Poland as we enter 2024.
In March 2024, inflation has moderated to 2.0 percent from the high of 16.1 percent recorded in March 2023. Consumer confidence is witnessing a notable uptrend, reaching its highest point in the past three years. This positive trend aligns with the overall strengthening of economic fundamentals in Poland, as evidenced by turnover figures, both in Agora Bytom and across the country.
Tenants of Agora Bytom have
increased revenues by 10.7 % in first quarter of 2024 compared with same period 2023.
The turnover among the tenants in Agora Bytom increased with 10.7 percent in first quarter of 2024 compared to same period 2023. The number of visitors has no change in percentage in first quarter of 2024 compared to same period in 2023. Agora Bytom has had approximately 4.9 million visitors in the center last twelve months.
In first quarter, the property segment achieved rental income and EBITDA of MNOK 18.9 and MNOK 9.5, respectively, compared to MNOK 17.6 and MNOK 10.3 in 2023. In first quarter
2024 Agora Bytom has higher costs of energy than estimated, due to a colder winter than normal in Poland.
Agora Bytom maintains a robust presence in the local market, consistently with high occupancy rates. The center is dedicated to ongoing improvements and actively engages in the rental market. Currently, Agora Bytom is in negotiations with several potential new tenants, demonstrating its commitment to expansion and development.
The number of visitors to Agora Bytom is 4.9
million visitors last twelve months.
The WAULT2 by area and income are as of March 31. 2024, 3.46 years and 3.30 years respectively.
Borgestad expects revenue and EBITDA to remain stable in the coming periods.
Following the completion of a five-year bank refinancing with Bank Pekao in December 2023, the Group now has ample time to explore transformative M&A opportunities and other liquidity events for Agora Bytom. Given the Group's current financial situation, there is no urgency to rush into a transaction. Instead, the Group will take the necessary time to identify the best strategy for both the Group and its shareholders.
2 Weighted average unexpired lease term.
7 BORGESTAD ASA
First Quarter 2024 Report | ||||
Refractory | ||||
2024 | 2023 | 2023 | ||
(MNOK) | 1st quarter | 1st quarter | 31.12 | |
Revenue | 204 | 201 | 1 072 | |
EBITDA | 3 | -0 | 102 | |
Earnings before financial items and tax (EBIT) | -2 | -5 | 80 |
In first quarter of 2024 the refractory segment achieved a revenue of MNOK 203.9 which is an increase of 1.3 percent compared to same period in 2023.
Adjusted EBIT margin increased with 1.2
percent last twelve months.
In the first quarter of 2024 an negative EBIT of MNOK 2.2 was achieved compared to a negative EBIT of MNOK 4.8 in 2023. The refractory segment has the last twelve months increased revenue with 20.4 percentage, and in the same period increased adjusted last twelve months EBIT3 margin from 1.7 percentage to 3.3 percentage last twelve months March 2024.
The focus, ambition and expected development is that the EBIT margin for the refractory segment will continue to grow steadily and continue the development going forward. The mid-term ambition for the segment is an EBIT level of 7 percent.
The refractory segment has a normal order intake and order backlog for the upcoming period.
In the first quarter the refractory segment has entered into three maintenance contracts with a total estimated contract value of MNOK 140 -
185. The contract periods vary among the three contracts, ranging from full delivery by 2024 to a duration of up to six years. Total estimated turnover from the three contracts in 2024 are between MNOK 50 - 55, with delivery in third and fourth quarter.
The Group has reduced its inventory by MNOK
27.3 compared to March 31, 2023 and will continue work for reduced inventory and working capital level in general going forward. Due to the seasonal fluctuations in the business it can be expected an increase in inventory level in second quarter of 2024 to provide materials and products for installation and delivery in high season in third quarter.
Over the past twelve months, there has been a significant decrease in net interest-bearing debt within the segment. As of March 31, 2024, the ratio of net interest-bearing debt to adjusted last twelve months EBITDA stands at 1.3, a substantial improvement from the ratio of 6.1 reported on March 31, 2023. The financial position for the refractory segment is reviewed as good at the end of the first quarter 2024.
3 Adjusted last twelve months EBIT are EBIT excluding the positive EBIT from Vienna Arbitration, review APM for more information.
8 BORGESTAD ASA
First Quarter 2024 Report
Other Activities Included in the Group
2024 | 2023 | 2023 | |
(MNOK) | 1st quarter | 1st quarter | 31.12 |
EBITDA | -5 | -3 | -12 |
Earnings before financial items and tax (EBIT) | -5 | -3 | -13 |
Other activities primarily include the group company Borgestad ASA.
In first quarter of 2024 Borgestad ASA have higher costs than normal for the company. The costs are expected to stablize at normalised levels going forward.
In 2023, Borgestad ASA entered into a mandate agreement with Q4 Næringsmegling AS for the
sale of the head office located at Gunnar Knudsens veg 144 in Skien, Norway.
The head office was introduced to the market for sale in February 2023, with an asking price of MNOK 16. The building is to date not sold.
Outlook
The Board of Directors expect that the Group will improve results and cash flow going forward. The Group expects that the margin development for the refractory segment will continue it's positive development trajectory.
Subsequent events
No significant events have occurred between 31.03.24 and the date of this report.
In addition, Borgestad ASA will continue exploring the possibilities for transformational M&A and other liquidity events for Agora Bytom.
9 BORGESTAD ASA
First Quarter 2024 Report
Condensed consolidated interim statement of income
2024 | 2023 | 2023 | ||
(NOK 1 000) (Unaudited) | Note | 1st quarter | 1st quarter | |
Revenue and other income | 2 | 222 759 | 218 594 | 1 141 417 |
Materials, supplies and subcontracting | 1 | 102 225 | 114 113 | 582 570 |
Salary and personnel expenses | 1 | 86 334 | 71 789 | 347 108 |
Other expenses | 26 044 | 25 686 | 84 262 | |
Total operating expenses | 214 603 | 211 588 | 1 013 939 | |
EBITDA | 8 156 | 7 006 | 127 478 | |
Depreciation | 6 | 7 903 | 6 987 | 31 750 |
Impairment of non-current assets | 6 | - | - | 94 298 |
Operating profit (EBIT) | 2 | 253 | 19 | 1 430 |
Financial items | ||||
Foreign currency gain/(loss) | 161 | 440 | 10 534 | |
Interest expenses | 5 206 | 8 835 | 51 910 | |
Other financial income/(expenses) | 551 | 16 | 2 664 | |
Net financial items | -4 494 | -8 379 | -38 712 | |
Profit before taxes | 2 | -4 241 | -8 359 | -37 283 |
Income tax | 721 | 1 709 | 26 309 | |
Profit/(loss) for the periode | -4 962 | -10 069 | -63 592 | |
Allocated as follows: | ||||
Non-controlling interest's share of the profit | -2 196 | -3 277 | 14 690 | |
Controlling interest's share of the profit | -2 766 | -6 792 | -78 281 | |
Basic and diluted earnings per share | 0,00 | -0,04 | -0,23 |
Condensed consolidated interim statement of comprehensive Income
2024 | 2023 | 2023 | |
1st quarter | 1st quarter | ||
Profit/(loss) for the periode | -4 962 | -10 069 | -63 592 |
Other comprehensive income | |||
Other income and expenses that will not be reclassified to profit: | |||
Net actuarial gain/(loss) on defined benefit pension plans net of tax | - | - | -1 819 |
Other income and expenses that may be reclassified to profit or loss: | |||
Translation differences | 17 293 | 36 147 | 24 058 |
Change in fair value of cash flow hedging net of tax | -2 554 | -1 206 | -7 406 |
change in other equity transactions | - | -20 | -1 |
Net other comprehensive income | 14 738 | 34 921 | 14 832 |
Total comprehensive income for the periode | 9 776 | 24 852 | -48 760 |
Non-controlling interest's share of total comprehensive income | -2 030 | 475 | 18 605 |
Controlling interest's share of total comprehensive income | 11 806 | 24 377 | -67 365 |
10 BORGESTAD ASA
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Borgestad ASA published this content on 16 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 May 2024 11:33:03 UTC.