Relais Group Plc
Company release 11 August 2022, 9:00 a.m. EEST

This release is a summary of Relais Group's Half-year financial report January-June 2022. The full release is attached to this company release and is available on our website at https://relais.fi/en/investors/.

APRIL-JUNE 2022 IN BRIEF

  • Net sales totaled EUR 58.6 million (April - June 2021: 52.2), +12.2% change
  • EBITDA was EUR 4.2 (5.4) million, 7.2% (10.3%) of net sales, -21.3% change
  • EBITA was EUR 3.7 (4.8) million, 6.4% (9.2%) of net sales, -22.6% change
  • EBIT was EUR -0.0 (1,5) million, -0.1% (2.9%) of net sales, -102.4% change
  • Comparable earnings per share excluding amortization of goodwill (undiluted) was EUR 0.07
    (0.21) *)
  • Net sales growth was driven by acquisitions
  • The increased proportion of repair shop sales contributed to an improved gross margin, while simultaneously increasing expenses below gross margin
  • The decrease in EBITA was due to the slow development of sales combined with increased expenses, which also reflect the changing business mix
  • The strong rise in fuel and energy prices has caused general caution in the customer base and to some extent delayed the demand for services and products in the industry
  • For the reasons mentioned above, the market situation as a whole was weaker than the previous year, but it improved especially in May-June
  • The poor availability of mechanics comprised a growth challenge for the repair shop business
  • The change in the salary system of the mechanics at Raskone had a temporary negative EBITA impact of EUR 0.2 million
  • The supply chain was still somewhat affected by the Covid-19 pandemic, which is estimated to continue due to China's extensive lockdown measures
  • Inventory was maintained at a level higher than normal to ensure delivery capacity
  • Measures to reduce working capital level going forward were accelerated

*) The average undiluted number of shares Apr-Jun 2022 was 17,997,644 and Apr-Jun 2021 17,681,930

JANUARY-JUNE 2022 IN BRIEF

  • Net sales totaled EUR 120.6 million (January - June 2021: 105.8), +14.0% change
  • EBITDA was EUR 10.8 (13.0) million, 9.0% (12.3%) of net sales, -16.8% change
  • EBITA was EUR 9.8 (12.2) million, 8.2% (11.5%) of net sales, -19.4% change
  • EBIT was EUR 2.5 (6.1) million, 2.1% (5.8%) of net sales, -58.8% change
  • Comparable earnings per share excluding amortization of goodwill (undiluted) was EUR 0.30
    (0.48) *)
  • The development of the EUR/SEK exchange rate during the review period had a negative effect on the Group's EBITA. At comparable exchange rates, EBITA during the review period would have been approximately EUR 0.5 million higher than reported
  • Net sales growth was driven by acquisitions
  • The winter conditions did not generate the same positive effect on net sales as during the exceptionally strong comparison period of H1/2021
  • The profitability of commercial vehicle repair and maintenance business suffered from effects of the pandemic in Q1/2022
  • The market situation was weak until the end of April, but has improved since then, especially in Sweden, approaching the situation at the end of H1 of the previous year
  • Organic growth of the repair shop business was negatively affected by the closing of two of Raskone's repair shops in 2021 as part of continuing development of the business. Like-for-like repair shop development as compared to last year was slightly negative, due to capacity constraints caused by sick leaves and availability of mechanics
  • The Company continued the implementation of its growth strategy by acquiring the shares of the Swedish Skeppsbrons Jönköping AB in May
  • The company acquired the remaining shares of TD Tunga Delar Sverige AB and SEC Scandinavia A/S from the minority shareholders in May
  • The direct impact of the Covid-19 pandemic on the business was smaller in the second quarter as compared to the first quarter, with the exception of the working capital situation. Sick leave situation has normalized
  • Due to the exceptionally long delivery times in the Far East purchases, the working capital tied up in inventories was at a higher level than the previous year
  • The AGM of 13 April 2022 decided on a dividend of 0.36 (0.30) EUR per share be paid for FY2021

*) The average undiluted number of shares Jan-Jun 2022 was 17,969,669 and Jan-Jun 2021 17,370,082.

2022 OUTLOOK AND LONG-TERM FINANCIAL TARGETS

Relais aims to grow at a faster pace than the market average. Despite the exceptionally poor market development in the beginning of this year, Relais feels well prepared to develop its business during the remainder of financial period of 2022. The overall market growth in the Nordic Countries is expected to be low this year and probably continue to be below last year's development.

In order to ensure the needed product supplies during 2022 some purchases by Relais Group companies have been pre-ordered from suppliers. Even though the overall market situation is reasonably stable at the time of the publication of this review and has improved compared to the first quarter, it is still weaker than last year and the level of uncertainty is high. The visibility is blurred by the continuing lack of components and semi-conductors, the increase in raw material prices, challenges in the global logistical chains, energy prices and the war in Ukraine. The continuing increases in energy prices, especially fuel prices, can create challenges for some of Relais Group's customers, especially in the maintenance and repair business as well as for those of Relais customers who in turn sell our goods as consumer discretionary items.

The Company does not provide a numeric guidance for financial year 2022.

According to the long-term target published on 17 May 2021, the company aims to reach pro forma net sales of 500 MEUR by the end of year 2026.

Relais Group has during the past financial years demonstrated the effectiveness and resilience of its business model even under challenging circumstances, being able to grow strongly and profitably. Future acquisitions are expected to support our growth platform.

KEY FIGURES

EUR thousand unless stated otherwiseApr-Jun 2022Apr-Jun 2021Jan-Jun 2022Jan-Jun 2021Jan-Dec
2021
Net sales 58,631 52,237 120,550 105,759 237,927
Gross profit 26,680 21,792 54,703 43,125 100,822
EBITDA 4,225 5,371 10,830 13,019 30,981
EBITDA margin, % 7.2% 10.3% 9.0% 12.3% 13.0%
EBITA 3,729 4,817 9,833 12,206 29,271
EBITA margin, % 6.4% 9.2% 8.2% 11.5% 12.3%
Operating profit -37 1,492 2,506 6,084 16,413
Operating profit margin, % -0.1% 2.9% 2.1% 5.8% 6.9%
Profit (loss) for the period -2,602 354 -2,226 2,265 7,708
Profit (loss) for the period margin, % -4.4% 0.7% -1.8% 2.1% 3.2%
Comparable profit (loss)
excluding amortisation of goodwill		 1,330 3,678 5,340 8,387 20,685
Comparable profit (loss)
excluding amortisation of goodwill margin, %		 2.3% 7.0% 4.4% 7.9% 8.7%
Return on equity (ROE) *) - - -5.1% 5.9% 9.7%
Equity ratio 36.1% 37.8% 36.1% 37.8% 37.9%
Net gearing 119.1% 90.7% 119.1% 90.7% 95.3%
Earnings per share, basic (EUR) **) -0.14 0.02 -0.12 0.13 0.44
Earnings per share, diluted (EUR) **) -0.14 0.02 -0.12 0.12 0.42
Comparable earnings per share, basic (EUR) **) -0.14 0.02 -0.12 0.13 0.44
Comparable earnings per share, diluted (EUR) **) -0.14 0.02 -0.12 0.12 0.42
Comparable earnings per share excluding **)
amortisation of goodwill, basic (EUR)		 0.07 0.21 0.30 0.48 1.17
Comparable earnings per share excluding **)
amortisation of goodwill, diluted (EUR)		 0.07 0.20 0.29 0.46 1.12
Personnel at the end of the period, FTE 1,023 854 1,023 854 950

*) Items affecting the comparability and amortization of goodwill are not eliminated

**) The average undiluted number of shares Jan-Jun 2022 was 17,969,669 and Jan-Jun 2021 17,370,082. The average diluted number of shares Jan-Jun 2022 was 18,725,984 and Jan-Jun 2021 18,261,525. 

CEO ARNI EKHOLM COMMENTS:

"As we communicated in connection with the Q1 interim management statement in May 2022, the market conditions under Q1 were exceptionally challenging. The mild winter conditions, the war in Ukraine and the resulting steep rise of the energy and fuel prices, combined with the increased sick leaves caused by Covid-19 all affected the market demand negatively and simultaneously produced challenges in having personnel in place when demand actually was present. At the time of the Q1 publication, we saw some signs of a partial market normalization, but remained cautious in assessing the outlook due to the uncertain market situation.

Looking at H1 as a whole from a business mix perspective, there were several different coinciding factors affecting the Group's total result. Firstly, in the commercial vehicle maintenance and repair business there were considerable capacity and demand constraints in Q1 due to Covid-19. In Q2 the customer demand recovered, but the lack of additional mechanics constrained our organic growth in that business. In addition, as part of the optimization of the Raskone workshop network two locations were discontinued late 2021. The negative net sales and EBITDA effect of the closed workshops during H1/2022 were 2.8 MEUR and 0.2 MEUR respectively. The related overhead cost optimization measures done at Raskone during H1 will only start to kick in during the latter part of H2.

Secondly, looking at the Group's wholesale business, the soft Q1 customer and consumer demand as described earlier, resulted in a negative organic growth of that business during the quarter and we believe, for the entire market. The partial recovery of the demand during Q2 was not enough to lift the total organic growth of the wholesale business to positive level for the entire H1, thus being unable to cover for the shortfall in the commercial vehicle repair and maintenance business. 

In the commercial vehicle repair and maintenance business area both Raskone and STS have seen good underlying demand for repair jobs during Q2. The biggest bottleneck for both companies has been the shortage of skilled labor. The Covid-19 related sick leaves affected the capacity utilization still during April, but in May-June the lack of mechanics was the biggest single contributor slowing down the growth. Several actions to remediate the situation have already been accelerated, e.g. cooperation with recruitment platforms and direct search agencies, expanding the recruitment base to the Baltic states, increased cooperation with local technical schools and investing in the HR organization but we expect this to take time to address. In addition, Raskone has implemented some changes in the salary system for the mechanics during Q2, moving some parts of the variable salary into the fixed salary of the mechanics. These changes had a temporary negative impact on EBITA of EUR 0.2 million in Q2 but are estimated to be cost neutral on an annual level and to contribute positively to employee retainment.

In the lighting and equipment business, the export driven success of Strands continued. By use of innovative social media marketing, active cooperation with the customers and launch of several interesting new product launches Strands has been able to expand its business especially in Germany and the Benelux markets. Over 65% of Strands sales go now to markets outside Sweden. Strands has currently over 90,000 followers in Instagram and over 1.1 million views on their YouTube channel so far this year, figures which clearly demonstrate the power of the brand.

During Q2 we continued our corporate acquisition activities in line with our strategy. Our latest acquisition is the Swedish company Skeppsbrons Jönköping AB, carried out in May. This acquisition will further strengthen our position as the biggest player within the independent commercial vehicle repair and maintenance sector in the Nordic countries. We are continuously doing research on various acquisition targets, and we are at any given time talking with several different parties about possible acquisitions. We act in a disciplined manner and strive to find targets having a combination of good strategic fit, competent and committed management, good and sustainable profitability level, a realistic valuation, and a strong future growth potential as a part of Relais Group. Our sector focus and in-depth knowledge of the vehicle aftermarket gives us a unique competitive advantage in doing corporate acquisitions. We believe that the current economic turbulence will trigger several interesting acquisition opportunities in the foreseeable future. We also expect to see a contraction of valuation multiples compared to what they have generally been during the past couple of years.

In the field of operational efficiency, we have initiated a pilot project in June at one of our biggest group companies, Startax Finland. The aim of the project is to improve the net working capital efficiency and define Group-wide best practices for further roll out in other group companies. Also, through the new group management team structure I have presented, there will be additional focus throughout the group on accelerating synergy benefits between the group-companies, especially in the areas of procurement, supplier management, cross sales and product range harmonization.

As a reaction to the recent profitability development the company is developing an action plan. In the development of the plan the company is looking into several profitability improvement measures, including but not limited to, e.g. sourcing, pricing and capacity utilization.

Summarizing H1, there were a range of variables that coincided and impacted our profit margins and the dynamics of the business mix. Some of these factors are outside of our control and contribute to the considerable uncertainties affecting the market demand during H2. The surging inflation caused mainly by the strong increase in energy and fuel prices, the ongoing war in Ukraine and the general customer and consumer cautiousness increase the difficulty of predicting the near future. On the other hand, the long delivery times of new commercial vehicles typically increase the demand of spare parts and repair and maintenance as the existing vehicles are used more extensively. In addition, we have ramped up our inventory of lighting products to guarantee our ability to deliver products to our customers during the important H2 season. In light of all this, I feel that we are well prepared to meet the future challenges by further development of operational efficiency and tangible action plans, utilizing intercompany synergies and by pursuing corporate acquisitions."

INVITATION TO THE WEBCAST

Relais Group's CEO Arni Ekholm and CFO Pekka Raatikainen will present the result to the media, investors and analysts at a webcast on 11 August 2022 from 10:00 am EEST. The webcast can be followed at: https://relais.videosync.fi/2022-q2-results.

Presentation material and video will be available on the company's website at https://relais.fi/en/investors/ after the event.

Relais Group Plc

Board of Directors

Further information:

Relais Group, CEO Arni Ekholm
tel. +358 40 760 3323
Email: arni.ekholm@relais.fi

Certified advisor:
Evli Plc, tel. +358 40 579 6210

Distribution:
Nasdaq Helsinki
Key media
www.relais.fi

Relais Group

Relais Group is a leading consolidator and acquisition platform on the vehicle aftermarket in the Nordic and Baltic countries. We have a sector focus in vehicle life cycle enhancement and related services. We also serve as a growth platform for the companies we own.

We are a profitable company seeking strong growth. We carry out targeted acquisitions in line with our growth strategy and want to be an active player in the consolidation of the aftermarket in our area of operation. Our acquisitions are targeted at companies having a good strategic fit with our group companies.

Our net sales in 2021 was EUR 237.9 (2020: 128.9) million. During 2021, we completed a total of six acquisitions. We employ approximately 1,000 professionals in six different countries. The Relais Group share is listed on Nasdaq Helsinki Ltd's Nasdaq First North Growth Market Finland with the stock symbol RELAIS.

www.relais.fi

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