Interim / Quarterly Report • Jul 27, 2022
Interim / Quarterly Report
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CONSOLIDATED UNAUDITED INTERIM REPORT FOR THE II QUARTER AND 6 MONTH OF 2022
| ORGANISATION | 3 |
|---|---|
| MANAGEMENT REPORT | 5 |
| SUMMARY OF THE SECOND QUARTER AND 6 MONTH RESULTS | 5 |
| COMMENTARY FROM THE MANAGEMENT | 8 |
| MAIN EVENTS | 8 |
| Strategic Investments | 8 |
| New Customer Agreement | 9 |
| EVENTS AFTER THE REPORTING DATE | 9 |
| OPERATING RESULTS | 10 |
| Revenue | 10 |
| Operating expenses | 11 |
| PERSONNEL | 12 |
| SUPERVISORY, AUDIT COMMITTEE AND MANAGEMENT BOARDS | 13 |
| ANNUAL GENERAL MEETING OF SHAREHOLDERS | 13 |
| SHARES OF AS HARJU ELEKTER AND SHAREHOLDERS | 13 |
| INTERIM FINANCIAL STATEMENT | 15 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 15 |
| CONSOLIDATED STATEMENT OF PROFIT AND LOSS | 16 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | 16 |
| CONSOLIDATED STATEMENT OF CASH FLOWS | 17 |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | 18 |
| NOTES TO INTERIM FINANCIAL STATEMENT | 19 |
| Note 1 Accounting methods and valuation principles used in the consolidated interim report | 19 |
| Note 2 Financial investments | 19 |
| Note 3 Investment properties | 20 |
| Note 4 Property, plant and equipment; intangible assets | 20 |
| Note 5 Borrowings | 21 |
| Note 6 Share capital | 21 |
| Note 7 Segment reporting | 21 |
| Note 8 Basic and diluted earnings per share | 23 |
| Note 9 Information on the statement of cash flows line items | 24 |
| Note 10 Transactions with related parties | 24 |
| THE MANAGEMENT BOARD DECLARATION FOR THE UNAUDITED FINANCIAL STATEMENTS | 26 |
AS Harju Elekter's share in its subsidiaries is 100%, unless otherwise stated in the chart.
The Parent company of the Group, focused on coordination of co-operation within the Group's companies and managing industrial real estate holdings, located in Keila
Manufacturer of electrical equipment for energy distribution, industrial and construction sectors, located in Keila
Producer of customer-based sheet metal products for the electrical engineering and telecom sector, located in Keila
ENERGO VERITAS OÜ (81%) A company trading in electrical materials
Manufacturer of electrical equipment for energy, industry, and infrastructure sectors, located in Ulvila, Kerava and in Kurikka
Electrical engineering company specializing in electrical contracting for the shipbuilding industry, located in Uusikaupunki
Industrial real estate holding company in Finland
HARJU ELEKTER UAB Engineering and contract manufacturing
of multidrive, MCC's and distribution systems, located in Panevežys
Engineering company for MV/LV power and distribution solutions for the construction, infrastructure, and renewable energy sector; manufacturer of prefabricated technical houses located in Malmö, Borlänge, Stockholm, Grytgöl, Borås, Luleå and Västerås
Industrial real estate holding company in Sweden
ESTONIA FINLAND OÜ SKELETON TECHNOLOGIES GROUP (6.14%) IGL-TECHNOLOGIES OY (10%) Developer and manufacturer of ultra-capacitors Developer of parking & e-mobility
solutions for electric car chargers
Harju Elekter is an international industrial group with more than 50 years of experience, being engaged in the development and production of electricity equipment and automation solutions. The customers of Harju Elekter are predominantly large utility, industrial, infrastructure, and maritime companies in the Nordic countries. Part of the technical solutions of Harju Elekter are aimed at the renewable energy sector, offering complete plans for solar power plants, electric vehicle charging stations and other related solutions. The main activities are supported by a modern company producing sheet metal details and products.
Market risk Rapid growth of wages Future of financial investments
Worldwide pandemics downtime and loss of data
The consolidated revenue for the second quarter of 2022 was 41.9 (Q2 2021: 36.3) million euros, and the revenue for the first half of the year was 79.2 (6M 2021: 67.0) million euros.
The gross profit for the Q2 was 963 (Q2 2021: 4,306) thousand euros and the gross profit margin was 2.3% (Q2 2021: 11.9%). The consolidated operating loss (EBIT) was -3,048 (Q2 2021: operating profit 651) thousand euros. The operating margin for the second quarter was -7.3% (Q2 2021: 1.8%). The net loss for the Q2 was -3,197 (Q2 2021: net profit 488) thousand euros of which the share of the owners of the parent company was -3,209 (Q2 2021: 485) thousand euros. The earnings per share were -0.18 euros (Q2 2021: 0.03) in the second quarter. The continuing rise in input prices and supply chain problems forced the Group to critically reassess all ongoing works and agreements for the coming periods. In addition to the increase in production costs, several completed projects turned out to be more complex and unprofitable than originally planned, exacerbated by the inefficiencies arising from supply constraints. The manufacturing business has significantly expanded its product portfolio in recent years through the addition of more sophisticated products but has been unable to deliver the targeted profitability due to the predominantly longterm nature of customer orders. Therefore, based on the best available knowledge, the Group has set up reserves to cover potential costs.
The gross profit for the first half of the year was 3,949 (6M 2021: 8,151) thousand euros and the gross profit margin was 5.0% (6M 2021: 12.2%). During the first six months, the operating loss (EBIT) was -4,174 (6M 2021: operating profit 1,168) thousand euros. In total, the Group's net loss for the first half of the year was -4,491 (6M 2021: net profit 785) thousand euros and earnings per share was -0.25 (6M 2021: 0.04) euros.
During the reporting period, the Group invested a total of 2.2 (6M 2021: 3.9) million euros in non-current assets, incl 1.2 (6M 2021: 0.2) million euros in investment properties, 0.7 (6M 2021: 3.5) million euros in property, plant, and equipment and 0.3 (6M 2021: 0.2) million euros in intangible assets. Most of the investments during the reporting period were directed to the construction of the Laohotell III production and warehouse complex, in the Allika Industrial Park, which today is filled with tenants. In addition, investments were made in production technology equipment and production and process management systems.
The value of the Group's non-current financial investments totaled 23.6 (31.12.21: 25.2) million euros as of the reporting date. The main changes were the partial sale of securities and the decrease in fair value of 0.9 million euros in the first half of the year. A total of 1.3 (6M 2021: 1.0) million euros was received from the partial sale of listed securities during the first half of the year, of which the realized profit was 0.32 (6M 2021: 0.27) million euros. Harju Elekter increased its stake in the technology company IGL-Technologies Oy from 5.5% to 10% by 0.2 million euros.
Current assets increased by 8.1 million to 71.7 million euros during six months. Most of the increase in current assets resulted from an increase in inventories by 10.7 million, to 38.2 million euros. A year ago, the Group was facing difficulties with the availability of raw materials and components, which led to the decision to increase inventories of critical products. The change in the value of inventories has also been significantly influenced by the increase in the cost price of inventories. In addition to the higher prices of materials, which accounted for 70% of total inventories at the end of the period, the proportion of work in progress and finished products increased due to backlogs on existing orders rising from delays regarding some specific components. Trade and other receivables decreased by 2.5 million to 31.1 million euros during the reporting period, and prepayments by 0.1 million to 1.7 million euros.
At the reporting date, the Group had liabilities in total of 74.8 (31.12.21: 60.7) million euros, of which current part accounted for 81.0%. During the six months current liabilities increased by 11.4 million euros to 60.6 million euros, incl. an increase in trade and other payables by 3.1 million euros and prepayments from customers increased 3.9 million euros. Borrowings have increased by 6.2 million euros due to the growth of business volumes and increased financing of inventories. At the end of the period, current and non-current borrowings were respectively – 20.4 (31.12.21: 16.9) and 14.2 (31.12.21: 11.4) million euros. Non-current loans and leases were used for real estate investments, expansion of the production building and investments in automatic production equipment.
Cash and cash equivalents increased by 0.1 million euros to 0.6 million euros during the six months and decreased by 1.3 million euros to 1.6 million euros in the comparable period.
During the first quarter, a significant amount of materials was purchased for long-term customer projects, resulting in a total of 10.7 million euros being placed in inventories over a period of six months. While the increase in receivables in the first quarter reduced cash flow from operating activities, then the trade receivables and prepayments were recovered during the second quarter. There was no need for higher-than-usual stock purchasing in the reporting quarter. The total cash flow from operating activities was 2.7 (Q2 2021: -1.4) million euros in the reporting quarter and -2.2 (6M 2021: 0.4) million euros in 6 months.
During the first half of the year, 1.3 (6M 2021: 4.5) million euros were spent on investment activities, of which a total of 2.7 (6M 2021: 5.6) million euros were paid for investments, and 1.3 (6M 2021: 1.0) million euros were received from the sale of the securities.
On May 24, dividends were paid for 2021 in the amount of 2.5 million euros, which was 0.3 million euros less than the year before. Current and non-current loans totaled 4.4 (6M 2021: 2.8) million euros and 1.2 (6M 2021: 1.4) million euros were repaid. The overdraft increased by 3.7 (6M 2021: 4.7) million euros. All in all, the financing activities brought in 3.6 (2021 6k: 2.8) million euros.
On 24 February 2022, Russia launched a large-scale military offensive against Ukraine. As a result, the European Union, the United States, the United Kingdom, and other countries have imposed a series of sanctions on Russia and Belarus. Although the Group has no assets or contract partners in the sanctioned countries, the military action had a significant impact on the economic activity of Harju Elekter. The biggest impact was the rapid increase in the price of materials and components after the start of the war. The war in Ukraine and the conflict with Russia are significantly increasing global risks to the functioning of supply chains already disrupted by the constraints imposed by the health crisis. In the case of some components, the Group continues to face a supply chain problem, with the waiting time being long. The Group is actively monitoring events on the market, looking for the best prices across the region, and has increased its inventory of critical materials and components at the start of the year. In addition to price increases, the war also affected the volume of sales orders for the Group. Firstly, work was not taken into the production on for which Russia would have been the final destination, and some contracts had to be cancelled or not renewed due to rapid price rises and supply difficulties. There has also been some negative impact from the rise in logistics prices. Geopolitical tensions and economic sanctions are also having an impact on stock markets, where volatility has increased significantly. The Group's risk assessments are reviewed on a regular basis.
| Key indicators (EUR´000) |
Q2 2022 |
Q2 2021 |
+/- | 6M 2022 |
6M 2021 |
+/- |
|---|---|---|---|---|---|---|
| Revenue | 41,914 | 36,310 | 15.4% | 79,235 | 67,028 | 18.2% |
| Gross profit | 963 | 4,306 | -77.6% | 3,949 | 8,151 | -51.6% |
| EBITDA | -1,953 | 1,638 | -219.2% | -2,022 | 3,124 | -164.7% |
| Operating profit/loss (-) (EBIT) | -3,048 | 651 | -568.2% | -4,174 | 1,168 | -457.4% |
| Profit/loss (-) for the period | -3,197 | 488 | -755.1% | -4,491 | 785 | -672.1% |
| Incl. attributable to owners of the parent company | -3,209 | 485 | -761.6% | -4,517 | 795 | -668.2% |
| Earnings per share (EPS) (euros) | -0.18 | 0.03 | -700% | -0.25 | 0.04 | -725.0% |
| 30.06.22 | 31.03.22 | +/- | 302 | 30.06.21 | +/- | |
| Total current assets | 71,677 | 76,760 | -6.6% | 54,780 | 30.8% | |
| Total non-current assets | 82,510 | 83,751 | -1.5% | 77,265 | 6.8% | |
| Total assets | 154,187 | 160,511 | -3.9% | 132,045 | 16.8% | |
| Total liabilities | 74,838 | 75,246 | -0.5% | 51,972 | 44.0% |
| Ratios (%) |
Q2 2022 |
Q2 2021 |
+/- | 6M 2022 |
6M 2021 |
+/- |
|---|---|---|---|---|---|---|
| Distribution cost to revenue | 3.6 | 3.6 | 0.0 | 3.6 | 3.8 | -0.2 |
| Administrative expenses to revenue | 6.6 | 6.7 | -0.1 | 6.9 | 6.9 | 0.0 |
| Labour cost to revenue | 21.8 | 21.1 | 0.7 | 22.5 | 22.3 | 0.2 |
| Gross margin (gross profit / revenue) | 2.3 | 11.9 | -9.6 | 5.0 | 12.2 | -7.2 |
| EBITDA margin (EBITDA / revenue) | -4.7 | 4.5 | -9.2 | -2.6 | 4.7 | -7.3 |
| Operating margin (EBIT / revenue) | -7.3 | 1.8 | -9.1 | -5.3 | 1.7 | -7.0 |
| Net margin (profit/loss (-) for the period / revenue) | -7.6 | 1.3 | -8.9 | -5.7 | 1.2 | -6.9 |
| Inventory turnover (revenue / avg. inventories) | 1.1 | 1.6 | -0.5 | 2.4 | 3.1 | -0.7 |
| Return on equity (ROE) (profit/loss (-) for the period/ avg.equity) |
-3.9 | 0.6 | -4.5 | -5.4 | 1.0 | -6.4 |
| 30.06.22 | 31.03.22 | +/- | 30.06.21 | +/- | ||
| Equity ratio (equity / total assets) (%) | 51.5 | 53.1 | -1.6 | 60.6 | -9.1 |
| Equity ratio (equity / total assets) (%) | 51.5 | 53.1 | -1.6 | 60.6 | -9.1 |
|---|---|---|---|---|---|
| Current ratio (current assets / current liabilities) | 1.2 | 1.2 | 0.0 | 1.3 | -0.1 |
| Debt ratio (total liabilities/ total assets) | 0.5 | 0.5 | 0.0 | 0.4 | 0.1 |
| Quick ratio ((current assets - inventories) / current liabilities) | 0.6 | 0.7 | -0.1 | 0.7 | -0.1 |
In terms of profitability, the second quarter of 2022 turned out to be the most difficult in the history of Harju Elekter. Persistent supply chain problems, in particular in the form of rising material prices and shortages involving several components, affected the profitability. Several extraordinary transactions contributed to the losses – one-off writeoffs of inventories and the termination of unprofitable contracts. The potential outcome of long-term projects has been critically reassessed.
We have taken a number of steps to cope with the challenges posed by world events. We will continue to reorganise production, in order to ensure efficiency in the face of disrupted supply chains. The relief obtained from framework contract price negotiations has not yet fully been reflected in second quarter results and is more likely to be seen in the second half of the year. We are also making preparations for the next possible wave of COVID-19, building on the experience of previous years and the ability to cope, ensuring minimum disruption to production efficiency.
On the positive side, the order book is covered for a long period, which is also characterised by continued growth in revenues. The green transition trend and the pressure to ramp up electrification is intensifying as a result of the Russia-Ukraine war. The severing of connections with the Russian energy market – electricity, gas, oil – will only accelerate investment in electricity networks to ensure reliability and modernisation. As a result of the fall in demand on the world market, market prices for raw materials (sheet metal and copper) have fallen sharply, which is helping to improve the cost price of our production and the fulfilment of orders.
Harju Elekter Oy increased its holding in technology company IGL-Technologies Oy from 5.5% to 10%. The cost of the additional investment was 0.2 million euros. With the additional investment Harju Elekter sees an opportunity to strengthen the Group's activities in the field of e-mobility. In cooperation with IGL-Technologies Oy, Harju Elekter will continue to improve the availability of complete packages for electric car charging systems and expand the network in both the Nordic and Baltic markets. The role of Harju Elekter in the partnership has been the development, production, and sales of charging equipment hardware and the provision of technologically suitable software and operation of equipment at IGL.
AS Harju Elekter signed a contract to dispose its 14% holding in SIA Energokomplekss to the company's managing director Kristaps Bleija to focus on its core business. Andres Allikmäe, who represented Harju Elekter in SIA Energokomplekss, resigned as a member of the Management Board on 4 April 2022.
On 28 April 2022, the AGM of shareholders of AS Harju Elekter was held. It amended the Articles of Association of AS Harju Elekter and it approved the 2021 annual report and the proposal for distribution of the profit and decided to pay shareholders a dividend of 0.14 euro per share for 2021, totalling 2.5 million euros. Dividends were transferred to shareholders' bank accounts on 24 May 2022. At the same meeting, the shareholders elected a new six-member Supervisory Board for the next five years and approved their remuneration.
The new Chairman of the Supervisory Board is Triinu Tombak.
Harju Elekter UAB signed a contract on 1 March 2022 with U.S. Steel Corporation (Exploratory Ventures LLC) to produce low voltage drives and MCC systems to control 1500 motors that will be used in new Big River Steel facility in Arkansas. Production and deliveries will take place until April 2023. The approximate volume of the contract is 10 million euros.
Telesilta Oy signed a contract on 7 April 2022 with Uudenkaupungin Työvene Oy to provide turnkey delivery of electrical, automation, and navigation systems for trailing suction hopper dredger. The contract price is 2.5 million euros. The delivery will take place at the end of 2023 and the ship operator will be the Maritime Office in Gdynia, Poland.
On the 7th of June, AS Harju Elekter signed a letter of intent with Reimax Electronics OÜ for the design, construction, and long-term lease of the production building at Allika Industrial Park. The design of the nearly 6,000 m2 building is planned for the third quarter of this year and will be completed by the end of 2023 at
the latest. The construction cost is approximately 6.5 million euros.
AS Harju Elekter Elektrotehnika will not renew the contract with Enefit Connect OÜ (before the transfer of the contract Elektrilevi OÜ) with the capacity of the prefabricated compact secondary substations with the capacities of 630 kVA and 1000 kVA and the accompanying components. The significantly changed economic environment, where the prices of input materials, components and energy have risen sharply since the outbreak of the war in Ukraine, does not favour the continuation of the contract under the previously agreed conditions, which is why it was decided not to renew the contract for the next 24 months. The contract expires on 28 February 2023.
Energo Veritas OÜ has cancelled two framework contracts with Enefit Connect OÜ for the supply of hermetic distribution transformers. From 2021 onwards, change in the market situation in terms of price levels, availability of raw materials as well as delivery deadlines has made it difficult for Energo Veritas OÜ to comply with the framework contracts concluded with Enefit Connect OÜ on the agreed terms, and the war in Ukraine further aggravated it. Enefit Connect OÜ has stated that it does not consider the cancellation of the framework contracts to be lawful and has informed Energo Veritas OÜ of its intention to claim a contractual penalty for the breach of the framework contracts as well as additional damages if the damages caused as a result of the cancellation exceed the contractual penalty.
In the beginning of July Harju Elekter AB signed an electricity project contract with Region Stockholm, the administrative body responsible for public transport. This contract will serve as the basis for the upgrading of the rectifier station of the Odenplan metro station by February 2024. The approximate volume of the contract is 1.7 million euros. The new project of Harju Elekter with Region Stockholm, which manages the Stockholm metro, represents the continuation of cooperation that already started with the modernisation of the Slussen metro in autumn 2020 and Albano and Rådhuset metro stations in spring 2021.
The Supervisory Board of AS Harju Elekter decided to increase the share capital of the company by 170,700 euros by issuing new ordinary shares. The increase of the share capital was triggered by the need to issue new shares to the key persons of Harju Elekter Group, incl. the members of the governing bodies, leading
specialists, and engineers, participating in the option program approved with the resolution of the general meeting on 3 May 2018. A total of 75 current and former employees participated in the share issue, subscribing for a total of 270,953 shares. The new shares to be issued during the increase of share capital shall grant the right to dividend for the financial year started on 1 January 2022. After the increase of the share capital, Harju Elekter has a total of 18,289,508 ordinary shares without nominal value and the share capital amounts to 11,522,390 euros.
| Revenue by business activities (EUR´000) |
Q2 2022 |
Q2 2021 |
+/- | 6M 2022 |
6M 2021 |
+/- | % 6M 2022 |
% 6M 2021 |
|---|---|---|---|---|---|---|---|---|
| Manufacturing and sale of electrical equipment | 34,875 | 30,006 | 16.2% | 65,627 | 55,857 | 17.5% | 82.8% | 83.3% |
| Retail and project-based sale of electrical products | 2,677 | 2,456 | 9.0% | 5,591 | 4,031 | 38.7% | 7.1% | 6.0% |
| Other products | 1,614 | 1,087 | 48.5% | 2,934 | 1,886 | 55.6% | 3.7% | 2.8% |
| Lease income | 836 | 657 | 27.2% | 1,647 | 1,541 | 6.9% | 2.0% | 2.3% |
| Electrical works | 1,076 | 1,603 | -32.9% | 2,034 | 2,861 | -28.9% | 2.6% | 4.3% |
| Other services | 836 | 501 | 66.9% | 1,402 | 852 | 64.6% | 1.8% | 1.3% |
| Total | 41,914 | 36,310 | 15.4% | 79,235 | 67,028 | 18.2% | 100.0% | 100.0% |
The Group's revenue for the reporting quarter was 41.9 (Q2 2021: 36.3) million euros, growing by 15.4% compared to the comparable period. Revenue for six months increased by 18.2% year-on-year, being 79.2 (6M 2021: 67.0) million euros. Comparing both periods, revenue increased in most business areas. Manufacturing and sales of electrical equipment accounted for the majority of the increase, rising by 4.9 million euros in the reporting quarter in yearly comparison and 9.8 million euros in the six-month comparison. One of the more notable works completed during the reporting quarter was a custom-made global data centre power supply equipment, which was manufactured at Harju Elekter's Lithuanian plant. It took just over half a year to create the prefabricated container solutions. The development and design process and innovative production took part in collaboration with our international partners and the engineers from our various production units and resulted in a complex full-load test.
Electrical works underperformed the previous year's result by 0.5 million euros for the quarter and 0.8 million euros for the six-month period. Shipyards have experienced difficulties with the availability of sheet metal, which slows down production and in turn delays the fulfilment of our services. The Finnish Government's new funding plans for the construction of border guard vessels will support the recovery of work volume in the sector.
Revenue from the manufacturing and sale of electrical equipment accounted for 83% and retail and project-based sale of electrical products accounted for 6% of the Group's quarterly revenue. The remaining 11% of the revenue of the Group was earned from the sale of metal products, leasing out industrial real estate, and electrical works in the shipbuilding sector.
| Revenue by segment (EUR´000) |
Q2 2022 |
Q2 2021 |
+/- | 6M 2022 |
6M 2021 |
+/- | % 6M 2022 |
% 6M 2021 |
|---|---|---|---|---|---|---|---|---|
| Production | 37,411 | 31,631 | 18.3% | 70,157 | 58,843 | 19.2% | 88.5% | 87.8% |
| Real Estate | 1,127 | 910 | 23.8% | 2,138 | 1,848 | 15.7% | 2.7% | 2.8% |
| Other activities | 3,376 | 3,769 | -10.4% | 6,940 | 6,337 | 9.5% | 8.8% | 9.4% |
| Total | 41,914 | 36,310 | 15.4% | 79,235 | 67,028 | 18.2% | 100.0% | 100.0% |
Thanks to the growth in sales volumes of companies manufacturing electrical equipment and the support of largescale special order work, the sales volume of the production segment increased by 18.3% to 37.4 million euros in the reporting quarter. Compared to the previous year, the Finnish subsidiary's product range has seen the addition of the ElektrA family of electric vehicle charging stations, for which a rapid increase in demand has also been observed. Compared to the first half of the year, the production segment's revenue increased by 19.2%, totaling 70.2 million euros. The production segment accounted for 89.3% of the Group's consolidated revenue in the second quarter.
The real estate segment has seen a steady increase in revenue, mostly driven by the addition of built or renovated spaces and changes in rental prices. The sale of renewable energy has also increased. In the reporting quarter, revenue from rental spaces in the industrial parks in Keila, Allika and Haapsalu and from other services of real estate segment amounted to 1.1 million euros, which is 24% more than a year earlier. The six-month revenue from the real estate segment increased by 15.7%, amounting to 2.1 million euros. In both periods, the real estate segment accounted for 2.7% of the Group's revenue. Demand for new rental spaces is high and occupancy is 100%.
Revenue from other activities decreased by 0.4 million euros quarter-on-quarter to 3.4 million euros but increased by 9.5% to 6.9 million euros compared to six months. Revenue was affected by an increase in sales of retail and projectbased sale of electrical products, while electrical work in the shipbuilding sector was declining year on year. Other activities accounted for 8.1% of the quarter's revenue.
| Revenue by markets (EUR´000) |
Q2 2022 |
Q2 2021 |
+/- | 6M 2022 |
6M 2021 |
+/- | % 6M 2022 |
% 6M 2021 |
|---|---|---|---|---|---|---|---|---|
| Estonia | 6,867 | 6,890 | -0.3% | 13,764 | 11,958 | 15.1% | 17.4% | 17.8% |
| Finland | 22,064 | 18,388 | 20.0% | 38,760 | 32,987 | 17.5% | 48.9% | 49.2% |
| Sweden | 3,499 | 6,122 -42.8% | 9,322 | 11,465 | -18.7% | 11.8% | 17.1% | |
| Norway | 2,907 | 2,001 | 45.3% | 7,414 | 3,870 | 91.6% | 9.4% | 5.8% |
| Netherlands | 3,802 | 1,010 276.4% | 5,346 | 2,331 | 129.3% | 6.7% | 3.5% | |
| Other | 2,775 | 1,899 | 46.1% | 4,629 | 4,417 | 4.8% | 5.8% | 6.6% |
| Total | 41,914 | 36,310 | 15.4% | 79,235 | 67,028 | 18.2% | 100.0% | 100.0% |
The Group's largest target markets are Estonia, Finland, Sweden, and Norway, where a total of 84% (Q2 2021: 92%) of the Group's products and services were sold in the reporting quarter.
Sales of the reporting quarter to the Estonian market remained at the same level as last year, being 6.9 million euros. In six months, revenue increased by 15.1% to 13.8 million euros. The increase was mainly due to the increase in sales of hermetic distribution transformers and distribution cabinets. The Estonian market accounted for 16.4% (Q2 2021: 19.0%) of the consolidated revenue in the reporting quarter.
In the comparison of markets, the sales growth was the highest for the Finnish market. In the reporting quarter, revenue was 3.7 million euros more than the year before, totaling 22.1 million euros. In six months, 38.8 (6M 2021: 33.0) million euros were earned from the Finnish market. The majority of the sales volume in the reporting quarter consisted of the sale of substations to Finnish electricity network companies. The lower-than-usual six-month revenue in the previous year were mainly affected by a decrease in orders due to the snowy and cold winter, the start of new long-term orders, as well as some supply constraints and material shortages. In the reporting quarter, more than half, or 52.6% (Q2 2021: 50.6%) of Harju Elekter products and services were sold to the Group's largest market.
Sales to the Swedish market decreased by 43% compared to the reporting quarters and by 19% compared to six months, being 3.5 and 9.3 million euros, respectively. The benchmark for the Swedish market was high, as the Swedish subsidiary had more projects underway than usual in the local market in the same period last year. Sweden accounted for 8.3% (Q2 2021: 16.9%) of the consolidated revenue of the reporting quarter.
Order volumes in the shipping sector in Norway are recovering. During the reporting quarter, 2.9 million euros worth of Group products and services were sold on the Norwegian market, which was 45% more than in the same period of the previous year. Compared to six months, revenue doubled to 7.4 million euros. Revenue increases in both periods are due to low order volume in the comparison periods. The Norwegian market accounted for 6.9% (Q2 2021: 5.5%) of the quarter's revenue.
In a quarter-on-quarter comparison, revenue to other markets increased by 3.7 to 6.6 million euros. Including sales to the Netherlands increased by 2.8 million euros. The six-month revenue to other markets was 10.0 (6M 2021: 6.7) million euros. Compared to six months of last year, sales to Germany decreased and sales to the Netherlands increased. Other countries accounted for a total of 15.7% (Q2 2021: 8.0%) of the Group's second quarter consolidated revenue.
| Q2 | Q2 | +/- | 6M | 6M | +/- | % 6M | % 6M | |
|---|---|---|---|---|---|---|---|---|
| (EUR´000) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||
| Cost of sales | 40,951 | 32,004 | 28.0% | 75,286 | 58,877 | 27.9% | 90.1% | 89.5% |
| Distribution costs | 1,515 | 1,315 | 15.2% | 2,866 | 2,529 | 13.3% | 3.4% | 3.8% |
| Administrative expenses | 2,764 | 2,437 | 13.4% | 5,429 | 4,654 | 16.7% | 6.5% | 6.7% |
| Total operating expenses | 45,230 | 35,756 | 26.5% | 83,581 | 66,060 | 26.5% | 100.0% | 100.0% |
| incl. depreciation and amortization | 1,095 | 987 | 10.9% | 2,152 | 1,957 | 10.0% | 2.6% | 3.0% |
| incl. total labour cost | 9,141 | 7,644 | 19.6% | 17,852 | 14,929 | 19.6% | 21.4% | 22.6% |
| incl. inclusive salary cost | 7,011 | 5,930 | 18.2% | 13,546 | 11,545 | 17.3% | 16.2% | 17.5% |
The Group's operating expenses increased by 26.5% during quarterly and 6 months comparison. The operating expenses in total for the reporting quarter were 45.2 (Q2 2021: 35.8) million euros, and for the first half of the year 83.6 (6M 2021: 66.0) million euros. The majority of the increase in operating expenses was due to the increase in the cost of sales, up 28% in the comparison of both periods. Prices of components and materials have increased by up to several hundred percent as a result of several crises. While at the beginning of the year, prices for materials and key components were forecast to stabilise and fall slightly, then the war in Ukraine at the end of February brought a new reality. Various sanctions against Russia and Belarus disrupted supply chains and rising energy prices led to a surge in global inflation. Increases in the cost of materials and components, rising salaries for skilled labour, and inefficiencies in production due to delays in the supply of needed components, made it necessary to critically re-evaluate the contracts for long-term projects and their potential profitability outcomes. The Group set up reserves to cover potential costs and expensed losses on already concluded transactions. The increased costs of goods and services sold exceeded the growth rate of revenue by 12.6 percentage points, reducing the gross margin by 9.6 percentage points, to 2.3 percent, from comparable quarterly figures. The gross profit margin for the six months was 5.0% (6M 2021: 12.2%).
The increase in distribution costs and administrative expenses was lower than the increase in revenue. Distribution costs increased by 0.2 million to 1.5 million euros quarter-on-quarter, making up 3.4% of the Group's operating expenses and 3.6% of revenue. Administrative expenses increased by 0.3 million euros to 2.8 million euros quarteron-quarter, accounting for 6.1% of the Group's operating expenses and 6.6% of revenue. The total distribution costs for the first half of the year were 2.9 and administrative expenses were 5.4 million euros.
Labour costs also increased with quarterly and half-yearly comparison, being 9.1 (Q2 2021: 7.6) and 17.9 (6M 2021: 14.9) million euros, respectively. The ratio of labour costs to the Group's revenue was 21.8% (Q2 2021: 21.1%) in the reporting quarter and 22.5% (6M 2021: 22.3%) in the first half of the year. The average monthly salary per employee of the Group during the reporting year was 2,551 (6M 2021: 2,406) euros, which was 6.0% more than in the previous period. A majority of the growth in labour costs and average wages was attributed to the significant increase in staff and wage pressure due to labour shortages in all markets.
Depreciation of property, plant and equipment and intangible assets totalled 1.1 million euros in the second quarter, and 2.2 million euros in the first half of the year, increasing by 10% compared to the comparable period. The increase in depreciation comparing the second quarters was due to the addition of several investments and, in particular, by completion of the expansion of the Lithuanian factory in the third quarter of 2021.
As a socially responsible company, Harju Elekter contributes to the next generation of engineering professionals by supporting academic learning through internships and knowledge sharing. Harju Elekter organises excursions for young people, participates in student events and job fairs, and offers practical work experience. Harju Elekter's Lithuanian subsidiary trained eight employees at its academy, which opened its doors in 2021, and they received a category IV electrician's diploma. The academy aims to attract young people to the field of engineering and to improve the qualifications of existing employees.
At the end of the reporting period, the Group employed 925 people, which was 57 employees more than a year ago. In the reporting quarter, the Group employed an average of 895 people, which was on average 77 employees more than in the comparable period. The largest increases were in Lithuanian and Finnish manufacturing companies, where the increase in production volumes resulting from the new production space and the overcapacity in production due to delays in the supply chain have created the need to recruit new staff. In the reporting quarter, 7.0 (Q2 2021: 5.9) million euros were paid to employees as salaries and remuneration. Wage pressure is high as the cost of energy, fuel and food have increased significantly compared to last year.
| Average numbers of employees | Numbers of employees | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Q2 | Q2 | 6M | 6M | +/- | % | % | |||||
| 2022 | 2021 | 2022 | 2021 | 30.06.22 | 30.06.21 | 30.06.22 | 30.06.21 | ||||
| Estonia | 386 | 376 | 388 | 366 | 400 | 414 | -14 | 43.2% | 47.7% | ||
| Finland | 166 | 149 | 163 | 141 | 175 | 159 | 16 | 18.9% | 18.3% | ||
| Lithuania | 277 | 220 | 265 | 221 | 283 | 224 | 59 | 30.6% | 25.8% | ||
| Sweden | 66 | 73 | 70 | 72 | 67 | 71 | -4 | 7.3% | 8.2% | ||
| Total | 895 | 818 | 886 | 800 | 925 | 868 | 57 | 100.0% | 100.0% |
In connection with the expiry of the term of office of the members of the Supervisory Board, the shareholders elected a new Supervisory Board from 04 May 2022, in the following composition: Triinu Tombak (financial consultant, Managing Director of TH Consulting OÜ), Andres Toome (consultant, Managing Director of OÜ Tradematic), Aare Kirsme (Member of the Supervisory Board of AS Harju KEK), Arvi Hamburg (Member of the Estonian Association of Engineers and Committee of Energy of the Academy of Sciences), Märt Luuk (Member of the Supervisory Board of AS Harju KEK) and Risto Vahimets (Ellex, Head of M&A, partner). The new Chairman of the Supervisory Board is Triinu Tombak. She has been the Member of the Supervisory Board of AS Harju Elekter from 1997 to 2007 and from 2012 to date.
The Supervisory Board of AS Harju Elekter decided on May 20th, 2022, to appoint Risto Vahimets as the new member of the Audit Committee and Andres Toome as the chairman of the Audit Committee.
Management Board of AS Harju Elekter has two members as of the reporting date: Mr. Tiit Atso (Chairman of the Group), and Mr. Aron Kuhi-Thalfeldt (Member of the Management Board, Head of the Real Estate and Energy Division).
Information about the education and career of the members of the management and Supervisory Boards as well as their membership in the management bodies of companies and their shareholdings have been published on the home page of the company at http://www.harjuelekter.com//company/governing-bodies/.
On 28 April, 2022, the Annual General Meeting (AGM) of Shareholders of AS Harju Elekter was held, in which 65 shareholders and their authorized representatives participated, representing a total of 11,581,806 votes, being 64.28% of the total votes.
The AGM approved the 2021 annual report and profit distribution and decided to pay dividends amounting to 0.14 euros per share, totalling 2.5 million euros. The list of the shareholders entitled to the dividends was fixed on 16 May 2022 at the end of the business day of the settlement system. The dividends were transferred to the shareholders' bank accounts on 24 May 2022. The AGM of Shareholders also elected a new 6-member Supervisory Board for the next five years and approved the remuneration principles for the members of the Management Board and the amendment to the Articles of Association of AS Harju Elekter.
| Security trading history | 6M 2022 | 2021 | 2020 | 2019 | 2018 |
|---|---|---|---|---|---|
| Opening price (euros) | 7.44 | 5.24 | 4.26 | 4.12 | 5.00 |
| Highest price (euros) | 7.74 | 10.50 | 5.26 | 5.20 | 6.68 |
| Lowest price (euros) | 5.28 | 5.20 | 3.20 | 4.01 | 3.89 |
| Closing price (euros) | 5.43 | 7.44 | 5.18 | 4.21 | 4.12 |
| Traded shares (pcs) | 438,213 | 2,048,865 | 1,160,598 | 531,415 | 1,100,773 |
| Turnover (in million euros) | 2.96 | 15.85 | 4.99 | 2.35 | 5.98 |
| Capitalisation (in million euros) | 97.84 | 134.06 | 91.89 | 74.68 | 73.09 |
| Average number of the shares (pcs) | 18,018,555 | 17,855,220 | 17,739,880 | 17,739,880 | 17,739,880 |
| EPS (euros) | -0.25 | 0.15 | 0.31 | 0.14 | 0.09 |
Division of shareholders by size of holding and list of shareholders with more than 5% holding as of 30 June 2022:
| Holding | No of shareholders |
% of all shareholders |
% of votes held |
Shareholders | Holding (%) |
|---|---|---|---|---|---|
| > 10% | 2 | 0.0 | 41.4 | AS Harju KEK | 30.90 |
| 1.0 – 10.0% | 8 | 0.1 | 21.0 | ING Luxembourg S.A. | 10.54 |
| 0.1 – 1.0 % | 55 | 0.6 | 15.1 | Endel Palla | 6.97 |
| < 0.1% | 9,777 | 99.3 | 22.5 | Shareholders holding under 5% | 51.59 |
| Total | 9,842 | 100.0 | 100.0 | Total | 100.00 |
As of 30 June 2022, AS Harju Elekter had 9,842 shareholders. The number of shareholders increased during the reporting quarter by 97 members. The largest shareholder of AS Harju Elekter is AS Harju KEK, a company based on local capital which holds 30.90% of AS Harju Elekter's share capital. On 30 June 2022, the members of the Supervisory and Management Boards owned, in accordance with their direct and indirect ownerships, in total of 3.92% of AS Harju Elekter shares. The complete list of shareholders of AS Harju Elekter is available on the website of the Nasdaq CSDhttps://nasdaqcsd.com/statistics/en/shareholders.
| ASSETS | Note | 30.06.2022 | 31.12.2021 | 30.06.2021 |
|---|---|---|---|---|
| Current assets | ||||
| Cash and cash equivalents | 629 | 574 | 1,576 | |
| Trade and other receivables | 31,134 | 33,689 | 27,215 | |
| Prepayments | 1,729 | 1,844 | 1,366 | |
| Inventories | 38,185 | 27,437 | 24,623 | |
| Total current assets | 71,677 | 63,544 | 54,780 | |
| Non-current assets | ||||
| Deferred income tax assets | 762 | 690 | 575 | |
| Non-current financial investments | 2 | 23,596 | 25,222 | 21,259 |
| Investment properties | 3 | 24,647 | 23,903 | 23,328 |
| Property, plant and equipment | 4 | 25,794 | 26,654 | 24,879 |
| Intangible assets | 4 | 7,711 | 7,544 | 7,224 |
| Total non-current assets | 82,510 | 84,013 | 77,265 | |
| TOTAL ASSETS | 7 | 154,187 | 147,557 | 132,045 |
| LIABILITIES AND EQUITY | ||||
| Liabilities | ||||
| Borrowings | 5 | 20,398 | 16,912 | 15,292 |
| Prepayments from customers | 8,558 | 4,659 | 1,919 | |
| Trade and other payables | 27,615 | 24,490 | 22,208 | |
| Tax liabilities | 3,525 | 3,156 | 2,946 | |
| Current provisions | 551 | 35 | 73 | |
| Total current liabilities | 60,647 | 49,252 | 42,438 | |
| Borrowings | 5 | 14,158 | 11,426 | 9,469 |
| Other non-current liabilities | 33 | 33 | 65 | |
| Total non-current liabilities | 14,191 | 11,459 | 9,534 | |
| Total liabilities | 74,838 | 60,711 | 51,972 | |
| Equity | ||||
| Share capital | 6 | 11,352 | 11,352 | 11,176 |
| Share premium | 1,601 | 1,601 | 804 | |
| Reserves | 17,913 | 18,716 | 15,173 | |
| Retained earnings | 48,595 | 55,315 | 53,080 | |
| Total equity attributable to the owners of the parent company | 79,461 | 86,984 | 80,233 | |
| Non-controlling interests | -112 | -138 | -160 | |
| Total equity | 79,349 | 86,846 | 80,073 | |
| TOTAL LIABILITIES AND EQUITY | 154,187 | 147,557 | 132,045 |
| Note | Q2 2022 |
Q2 2021 |
6M 2022 |
6M 2021 |
|
|---|---|---|---|---|---|
| Revenue Cost of sales |
7 | 41,914 -40,951 |
36,310 -32,004 |
79,235 -75,286 |
67,028 -58,877 |
| Gross profit | 963 | 4,306 | 3,949 | 8,151 | |
| Distribution costs Administrative expenses Other income Other expenses |
-1,515 -2,764 322 -54 |
-1,315 -2,437 188 -91 |
-2,866 -5,429 378 -206 |
-2,529 -4,654 360 -160 |
|
| Operating profit/loss (-) | 7 | -3,048 | 651 | -4,174 | 1,168 |
| Finance income Finance costs |
34 -111 |
51 -60 |
74 -230 |
68 -158 |
|
| Profit/loss (-) before tax Income tax Profit/loss (-) for the period |
9 | -3,125 -72 -3,197 |
642 -154 488 |
-4,330 -161 -4,491 |
1,078 -293 785 |
| Profit /loss (-) attributable to: Owners of the parent company Non-controlling interests |
-3,209 12 |
485 3 |
-4,517 26 |
795 -10 |
|
| Earnings per share Basic earnings per share (euros) Diluted earnings per share (euros) |
8 8 |
-0.18 -0.18 |
0.03 0.03 |
-0.25 -0.25 |
0.04 0.04 |
| Note | Q2 2022 |
Q2 2021 |
6M 2022 |
6M 2021 |
|
|---|---|---|---|---|---|
| Profit/loss (-) for the period | -3,197 | 488 | -4,491 | 785 | |
| Other comprehensive income | |||||
| Items that may be reclassified to profit or loss Impact of exchange rate changes of a foreign subsidiaries |
-86 | 19 | -65 | -4 | |
| Items that will not be reclassified to profit or loss | |||||
| Gain on sales of financial assets | 2 | 169 | 221 | 320 | 265 |
| Net gain/loss (-) on revaluation of financial assets | 2 | -336 | 7,954 | -858 | 8,319 |
| Total comprehensive income for the period | -253 | 8,194 | -603 | 8,580 | |
| Other comprehensive income | -3,450 | 8,682 | -5,094 | 9,365 | |
| Total comprehensive income attributable to: | |||||
| Owners of the Company | -3,462 | 8,680 | -5,120 | 9,375 | |
| Non-controlling interests | 12 | 2 | 26 | -10 |
| Note | 6M 2022 |
6M 2021 |
|
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit/loss (-) for the period | -4,491 | 785 | |
| Adjustments | |||
| Depreciation and amortization | 3,4 | 2,152 | 1,957 |
| Gain on sale of property, plant and equipment | -2 | -12 | |
| Share-based payments | 10 | 120 | 149 |
| Finance income | -74 | -68 | |
| Finance costs | 230 | 158 | |
| Income tax | 9 | 161 | 293 |
| Changes | |||
| Changes in trade receivables and prepayments | 2,963 | -538 | |
| Changes in inventories | -10,748 | -6,001 | |
| Changes in trade payables and prepayments | 7,932 | 4,227 | |
| Corporate income tax paid | 9 | -201 | -369 |
| Interest paid | -249 | -176 | |
| Total cash flow (-outflow) from operating activities | -2,207 | 405 | |
| Cash flows from investing activities | |||
| Payments for investment properties | 9 | -1,526 | -106 |
| Payments for property, plant and equipment | 9 | -682 | -3,519 |
| Payments for intangible assets | -289 | -207 | |
| Acquisition of financial investments | 2 | -227 | -1,737 |
| Proceeds from sale of property, plant and equipment | 7 | 28 | |
| Proceeds from sale of other financial investments | 2 | 1,315 | 981 |
| Dividends received | 71 | 66 | |
| Received interests | 2 | 7 | |
| Total cash flow (-outflow) from investing activities | -1,329 | -4,487 | |
| Cash flows from financing activities | |||
| Change in overdraft balance | 5 | 3,661 | 4,671 |
| Proceeds from borrowings | 5 | 4,381 | 2,821 |
| Repayment of borrowings | 5 | -1,165 | -1,448 |
| Repayments of lease liabilities | 5 | -671 | -547 |
| New lease liabilities | 0 | 165 | |
| Dividends paid | -2,523 | -2,838 | |
| Dividends income tax paid | -55 | -10 | |
| Total cash flow (-outflow) from financing activities | 3,628 | 2,814 | |
| Total net cash flow (-outflow) | 92 | -1,268 | |
| Cash and cash equivalents at the beginning of the period | 574 | 2,843 | |
| Changes in cash and cash equivalents | 92 | -1,268 | |
| Effect of exchange rate fluctuations on cash and cash equivalents | -37 | 1 | |
| Cash and cash equivalents at the end of the period | 629 | 1,576 |
| 1 January – 30 June | Share capital |
Share premium |
Reser ves |
Retained earnings |
Attributable to owners of the parent company |
Non controlling interests |
Total equity |
||
|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2021 | 11,176 | 804 | 6,709 | 54,858 | 73,547 | -150 | 73,397 | ||
| Comprehensive income | |||||||||
| Profit for the period | 0 | 0 | 0 | 795 | 795 | -10 | 785 | ||
| Other comprehensive income | 0 | 0 | 8,315 | 265 | 8,580 | 0 | 8,580 | ||
| Total comprehensive income | 0 | 0 | 8,315 | 1,060 | 9,375 | -10 | 9,365 | ||
| Transactions with owners recognized directly in equity | |||||||||
| Share-based payments (Note 8,10) | 0 | 0 | 149 | 0 | 149 | 0 | 149 | ||
| Dividends | 0 | 0 | 0 | -2,838 | -2,838 | 0 | -2,838 | ||
| Total transactions with owners | 0 | 0 | 149 | -2,838 | -2,689 | 0 | -2,689 | ||
| Balance at 30 June 2021 | 11,176 | 804 | 15,173 | 53,080 | 80,233 | -160 | 80,073 | ||
| Balance at 01 January 2022 | 11,352 | 1,601 | 18,716 | 55,315 | 86,984 | -138 | 86,846 | ||
| Comprehensive income | |||||||||
| Profit for the period | 0 | 0 | 0 | -4,517 | -4,517 | 26 | -4,491 | ||
| Other comprehensive income | 0 | 0 | -923 | 320 | -603 | 0 | -603 | ||
| Total comprehensive income | 0 | 0 | -923 | -4,197 | -5,120 | 26 | -5,094 | ||
| Transactions with owners recognized directly in equity | |||||||||
| Share-based payments (Note 8,10) | 0 | 0 | 120 | 0 | 120 | 0 | 120 | ||
| Dividends | 0 | 0 | 0 | -2,523 | -2,523 | 0 | -2,523 | ||
| Total transactions with owners | 0 | 0 | 120 | -2,523 | -2,403 | 0 | -2,403 | ||
| Balance at 30 June 2022 | 11,352 | 1,601 | 17,913 | 48,595 | 79,461 | -112 | 79,349 |
On April 28, 2022, the Annual General Meeting of shareholders of AS Harju Elekter was held; it approved the 2021 annual report and the proposal for distribution of the profit and decided to pay shareholders a dividend of 0.14 euro per share for 2021, totalling 2,523 thousand euros. The dividends were paid to the shareholders on 24 May 2022 by a transfer to the bank account of the shareholder.
AS Harju Elekter is a company registered in Estonia. The interim report prepared as of 30 June 2022 comprises AS Harju Elekter (the "Parent Company") and its subsidiaries AS Harju Elekter Elektrotehnika, AS Harju Elekter Teletehnika, Energo Veritas OÜ, Harju Elekter Oy, Harju Elekter Kiinteistöt Oy, Telesilta Oy, Harju Elekter AB, Harju Elekter Services AB and Harju Elekter UAB (the "Group"). AS Harju Elekter has been listed on Tallinn Stock Exchange since 30 September 1997; 30.90% of its shares are held by AS Harju KEK.
The consolidated interim financial statements of AS Harju Elekter and its subsidiaries have been prepared in accordance with International Reporting Standards (IFRS) as adopted by the European Union. This consolidated interim report is prepared in accordance with the requirements for international accounting standard IAS 34 "Interim Financial Reporting" on condensed interim financial statements. The interim report is prepared on the basis of the same accounting methods as used in the annual report concerning the period ending on 31 December 2021. The interim report should be read in conjunction with the Group's annual report of 2021, which is prepared in accordance with International Financial Reporting Standards (IFRS).
According to the assessment of the Management Board, the interim report for the second quarter and 6 month of 2022 of AS Harju Elekter presents a true and fair view of the financial result of the consolidation Group guided by the going-concern assumption. This interim report has been neither audited nor reviewed by auditors and only includes the consolidated reports of the Group.
The financial statements are presented in euros, which is the Group's functional and presentation currency. The consolidated interim financial statement has been drawn up in thousands of euros and all the figures have been rounded to the nearest thousand, unless indicated otherwise.
| 30.06.2022 | 31.12.2021 | 30.06.2021 | |
|---|---|---|---|
| Listed securities (fair value through other comprehensive income) | 1,300 | 2,898 | 2,748 |
| Other equity investments (fair value through other comprehensive income) |
22,287 | 22,315 | 18,503 |
| Other financial assets through profit or loss | 9 | 9 | 8 |
| Total | 23,596 | 25,222 | 21,259 |
| Changes | 6M 2022 | 12M 2021 | 6M 2021 |
| 1. Financial assets at fair value through other comprehensive income |
|||
| Carrying amount at the beginning of the period | 25,213 | 11,911 | 11,911 |
| Acquisitions | 227 | 1,749 | 1,737 |
| Sale of financial assets | -995 | -716 | -716 |
| Change in fair value through other comprehensive income | -858 | 12,269 | 8,319 |
| Carrying amount at the end of the period | 23,587 | 25,213 | 21,251 |
| 2. Financial assets at fair value through profit and loss | |||
| Carrying amount at the beginning of the period | 9 | 7 | 7 |
| Change in fair value through profit and loss | 0 | 2 | 1 |
| Carrying amount at the end of the period | 9 | 9 | 8 |
| Total carrying amount at the end of the period | 23,596 | 25,222 | 21,259 |
A total of 1,315 thousand euros was received from the partial sale of the listed securities in the first half of year. Realized gain on sale of financial assets in the amount of 320 thousand euros was recognized through other comprehensive income. During the first six month of 2021, 981 thousand euros were received from the sale of securities listed on the stock exchange, of which the realized profit was 265 thousand euros. The fair value of securities decreased by 858 thousand euros in first half of year, increased by 394 thousand euros in 6M 2021.
As of 30 June 2022, other equity investments include an investment in the shares of OÜ Skeleton Technologies Group in the amount of 21.8 (30.06.2021: 18.0) million euros and in the shares of IGL-Technologies Oy in the amount of 0.5 (30.06.2021: 0.25) million euros. In the reporting quarter, Harju Elekter Oy increased its holding in technology company IGL-Technologies Oy from 5.5% to 10%. In the second quarter, AS Harju Elekter sold a 14% holding in SIA Energokomplekss to the company's managing director Kristaps Bleija, to focus on its core business. As of 30 June 2021, the investment in the shares of SIA Energokompleks was 0.3 million euros.
AS Harju Elekter acquired an 10% stake in OÜ Skeleton Technologies Group on 3 June 2015. The company is engaged in the development and production of supercapacitors and is gradually increasing production. The assessment of future cash flows of the OÜ Skeleton Technologies Group includes significant uncertainty. The measurement of fair value is a complex process in the absence of an active market and when this is the case, this kind of measurement involves making assumptions and decisions. In assessing the fair value of the company, the Group's management based the assessment on the issue price of the new shares used in the financing rounds, the economic indicators disclosed by OÜ Skeleton Technologies Group, the associated investment risk, and weighted the marketability of instrument. As of the reporting date, the registered holding of Harju Elekter in OÜ Skeleton Technologies Group is 6.14%.
| Note | 6M 2022 | 12M 2021 | 6M 2021 | |
|---|---|---|---|---|
| Balance at the beginning of the period | 23,903 | 23,605 | 23,605 | |
| Additions | 7 | 1,250 | 1,321 | 208 |
| Depreciation | 7 | -484 | -970 | -485 |
| Reclassification from property, plant and equipment | 4 | -22 | -53 | 0 |
| At the end of the period | 24,647 | 23,903 | 23,328 |
| Note | 6M 2022 | 12M 2021 | 6M 2021 | |
|---|---|---|---|---|
| 1. Property, plant and equipment | ||||
| Balance at the beginning of the period | 26,654 | 22,494 | 22,494 | |
| Additions to right-of-use assets | 0 | 880 | 0 | |
| Additions | 7 | 699 | 5,741 | 3,485 |
| Sales and write-off in carrying amount | -7 | -17 | -17 | |
| Depreciation | 7 | -1,546 | -2,714 | -1,308 |
| Reclassification from inventories | 0 | 233 | 233 | |
| Reclassification to investment properties | 3 | 22 | 53 | 0 |
| Impact of exchange rate changes | -28 | -16 | -8 | |
| At the end of the period | 25,794 | 26,654 | 24,879 | |
| 2. Intangible assets | ||||
| Balance at the beginning of the period | 7,544 | 7,199 | 7,199 | |
| Additions | 7 | 289 | 680 | 189 |
| Amortization | 7 | -122 | -334 | -164 |
| Impact of exchange rate changes | 0 | -1 | 0 | |
| At the end of the period | 7,711 | 7,544 | 7,224 |
| 30.06.2022 | 31.12.2021 | 30.06.2021 | |
|---|---|---|---|
| Current borrowings | |||
| Current bank loans | 17,813 | 14,152 | 12,227 |
| Current portion of non-current bank loans | 1,045 | 1,485 | 2,355 |
| Current portion of non-current lease liabilities | 602 | 1,261 | 564 |
| Other current loans | 938 | 14 | 146 |
| Total current borrowings | 20,398 | 16,912 | 15,292 |
| Non-current borrowings | |||
| Non-current bank loans | 11,903 | 9,171 | 7,464 |
| Non-current lease liabilities | 2,255 | 2,255 | 2,005 |
| Total non-current borrowings | 14,158 | 11,426 | 9,469 |
| Total borrowings | 34,556 | 28,338 | 24,761 |
| Changes in borrowings | 6M 2022 | 12M 2021 | 6M 2021 |
| Loans and borrowings at the beginning of the period | 28,338 | 19,088 | 19,088 |
| Change in overdraft balances Received non-current loans |
3,661 3,457 |
6,414 8,063 |
4,671 2,821 |
| Repayments of non-current loans | -1,165 | -5,058 | -835 |
| Other received and repaid loans | 924 | -746 | -613 |
| New lease liabilities | 0 | 2,031 | 165 |
| Repayments of non-current lease liabilities | -671 | -1,476 | -547 |
| Impact of exchange rate changes | 12 | 22 | 11 |
| 30.06.2022 | 31.12.2021 | 30.06.2021 | |
|---|---|---|---|
| Share capital (thousand euros) | 11,352 | 11,352 | 11,176 |
| Number of shares (pcs) | 18,018,555 | 18,018,555 | 17,739,880 |
| Book value of a share (euros) | 0.63 | 0.63 | 0.63 |
In the third quarter of 2021, AS Harju Elekter increased the share capital of the company by 175,565.25 euros by issuing new ordinary shares without nominal values in connection with the exercise of the employee stock option plan.
In the consolidated financial statements, three segments are distinguished: Production, Real Estate and Other activities.
Production - manufacturing and sale of electricity distribution and control equipment as well associated activities. This segment includes the Group's companies AS Harju Elekter Elektrotehnika, AS Harju Elekter Teletehnika, Harju Elekter Kiinteistöt Oy, Harju Elekter Oy, Harju Elekter UAB, Harju Elekter AB and Harju Elekter Services AB.
Real estate - real estate development, maintenance and leasing, services related to the maintenance of real estate and production capacity and intermediation of services. Real estate has been identified as a reportable segment because its result and assets are more than 10% of the total result and assets of all segments. The entity in this business segment is the Parent company.
Other activities - sales of the products of the Group and its related companies as well as products needed for electrical installation works mainly to retail customers and smaller and medium-sized electrical installation companies; management services, project management for installation works and electrical engineering for shipbuilding. Other activities are of less importance to the Group and none of them constitutes a separate segment for reporting purposes. This segment includes the Parent Company and the Group's subsidiaries Energo Veritas OÜ and Telesilta Oy. Other activities are of less importance to the Group and none of them constitutes a separate segment for reporting purposes.
The Group assesses the performance of its operating segments on the basis of revenue and operating profit. Based on the assessment of the Parent company's Management Board, inter-segment transactions are carried out on ordinary market terms that do not differ substantially from the terms agreed in transactions conducted with third parties. Unallocated assets comprise the Parent company's other receivables, prepayments, and other financial investments. Unallocated liabilities consist of the Parent company's (in Estonia) interest-bearing loans and borrowings, tax liabilities and accrued expenses.
| Note | Production | Real Estate |
Other activities |
Elimi nation |
Consoli dated |
|
|---|---|---|---|---|---|---|
| 6 months 2022 | ||||||
| Revenue from external customers Inter-segment revenue Segment revenue |
70,157 802 70,959 |
2,138 862 3,000 |
6,940 226 7,166 |
0 -1,890 -1,890 |
79,235 79,235 |
|
| Operating profit | -4,383 | 1,200 | -1,065 | 74 | -4,174 | |
| Segment assets Unallocated assets incl. Financial investments incl. Other receivables and prepayments Total assets |
97,255 | 27,602 | 30,001 | -23,881 | 130,977 23,210 23,101 109 154,187 |
|
| Capital expenditure Depreciation and amortization |
3,4 3,4 |
797 1,299 |
1,250 484 |
191 379 |
0 -10 |
2,238 2,152 |
| 6 months 2021 | ||||||
| Revenue from external customers Inter-segment revenue Segment revenue |
58,843 199 59,042 |
1,848 908 2,756 |
6,337 94 6,431 |
0 -1,201 -1,201 |
67,028 67,028 |
|
| Operating profit | 281 | 919 | -186 | 154 | 1,168 | |
| Segment assets Unallocated assets incl. Financial investments incl. Other receivables and prepayments Total assets |
79,109 | 25,289 | 26,261 | -19,694 | 110,965 21,080 21,004 76 132,045 |
|
| Capital expenditure | 3,4 | 3,441 | 208 | 233 | 0 | 3,882 |
| Depreciation and amortization | 3,4 | 1,053 | 485 | 430 | -11 | 1,957 |
| 6M 2022 | 6M 2021 | |
|---|---|---|
| Estonia | 13,764 | 11,958 |
| Finland | 38,760 | 32,987 |
| Sweden | 9,322 | 11,465 |
| Norway | 7,414 | 3,870 |
| Netherlands | 5,346 | 2,331 |
| Other | 4,629 | 4,417 |
| Total revenue | 79,235 | 67,028 |
| 6M 2022 | 6M 2021 | |
|---|---|---|
| Manufacturing and sale of electrical equipment | 65,627 | 55,857 |
| Retail and project-based sale of electrical products | 5,591 | 4,031 |
| Other products | 2,934 | 1,886 |
| Lease income | 1,647 | 1,541 |
| Electrical works | 2,034 | 2,861 |
| Other services | 1,402 | 852 |
| Total revenue | 79,235 | 67,028 |
Basic earnings per share are calculated by dividing the net profit for the reporting period with the weighted average number of shares issued during the period.
Diluted earnings per share are calculated by taking into account the shares that will be potentially issued. As at 30 June 2022, the Group had a total of 758,968 potentially issuable ordinary shares. In accordance with the resolution of the general meeting of shareholders held on 3 May 2018, the issue price of the shares acquired under share option was fixed at the average closing price of the share on the Nasdaq Tallinn Stock Exchange in the preceding three calendar years as at 31 December. The price in the 2018 round was 3.49 euros, in the 2019 round 3.98 euros and in the 2020 round 4.44 euros. From the 2018 round, 278,675 shares were converted last year.
The resolution of the general meeting of shareholders held on 29 April 2021 approved the new 2021–2022 share option programme, under which the members of the Management Boards and key personnel of AS Harju Elekter and its subsidiaries are entitled to receive share options. The issue price of the shares to be acquired on the basis of the option is the average of the closing prices of the shares for the calendar years of 2018, 2019, and 2020 on the Nasdaq Tallinn Stock Exchange as of 31 December, i.e., 4.50 euros per share.
As to share-based compensation to which IFRS 2 requirements apply, the subscription price of shares will continue to include the cost of the services provided by employees for the share-based compensation. The value of the service was estimated by an independent expert at 1.55 euros per share in the 2018 round, 0.73 euros in the 2019 round, 0.55 euros in the 2020 round and 3.55 euros in the 2021. Thus, the share subscription prices within the meaning of IFRS 2 are 5.04 euros, 4.71 euros, 4.99 euros and 8.05 euros. The potential shares will only become dilutive after their average market price for the period exceeds these values. During the period from 1 April to 30 June 2022, the average market price of the shares was 6.28 (Q2 2021: 8.40) euros and during the period from 1 January to 30 June 2022, the average market price of the shares was 6.74 (6M 2021: 7.61) euros.
| Unit | Q2 2022 | Q2 2021 | |
|---|---|---|---|
| Profit attributable to equity holders of the parent company | EUR '000 | -3,209 | 485 |
| Average number of shares outstanding | Pc '000 | 18,019 | 17,740 |
| Basic earnings per share | EUR | -0.18 | 0.03 |
| Adjusted number of shares during the period | Pc '000 | 18,066 | 17,838 |
| Diluted earnings per share | EUR | -0.18 | 0.03 |
| Unit | 6M 2022 | 6M 2021 | |
| Profit attributable to equity holders of the parent company | EUR '000 | -4,517 | 795 |
| Average number of shares outstanding | Pc '000 | 18,019 | 17,740 |
| Basic earnings per share | EUR | -0.25 | 0.04 |
| Adjusted number of shares during the period | Pc '000 | 18,074 | 17,829 |
| Diluted earnings per share | EUR | -0.25 | 0.04 |
| Note | 6M 2022 | 6M 2021 | |
|---|---|---|---|
| Corporate income tax | |||
| Income tax expense in the statement of profit or loss | -161 | -293 | |
| Decrease (+)/increase (-) in prepayment and decrease (-)/increase (+) in liability | -23 | -25 | |
| Dividend income tax expense | 55 | 10 | |
| Income tax expense on dividends | -71 | -61 | |
| Impact of exchange rate changes | -1 | 0 | |
| Corporate income tax paid | -201 | -369 | |
| Paid for investment properties | |||
| Acquisitions of investment properties | 3 | -1,250 | -208 |
| Liability decrease (-)/ increase (+) incurred by the acquisitions | -276 | 102 | |
| Paid for investment properties | -1,526 | -106 | |
| Paid for property, plant and equipment | |||
| Acquisitions of property, plant and equipment | 4 | -699 | -3,485 |
| Liability decrease (-)/ increase (+) incurred by the acquisitions | 17 | -34 | |
| Paid for property, plant and equipment | -682 | -3,519 |
The related parties of AS Harju Elekter are Members of the Management Board and the Supervisory Board of the Group, their close associates, and companies significantly influenced or controlled by the aforementioned persons. The Group's management comprises members of the Parent company's Supervisory and Management Boards. During the reporting period, the Group has made transactions with related parties as follows:
| 30.06.2022 | 31.12.2021 | 30.06.2021 | |
|---|---|---|---|
| Balances with related parties: | |||
| - Payables for goods and services | 99 | 93 | 63 |
| - Payables to Management and Supervisory Boards | 71 | 15 | 81 |
| 6M 2022 | 12M 2021 | 6M 2021 | |
| Purchase of goods and services from related parties: | |||
| - Lease of property, plant and equipment from AS Harju KEK | 41 | 118 | 77 |
| - Other services from AS Entek | 509 | 599 | 275 |
| Sale of goods and services to related parties: | |||
| - Other services for AS Harju KEK | 3 | 3 | 2 |
| - Sale of goods to AS Entek | 0 | 3 | 3 |
| Remuneration of the Management and Supervisory Boards: | |||
| - Salary, bonuses, additional other remuneration (incl. severance pay) | 215 | 413 | 235 |
| - Social security tax | 71 | 133 | 78 |
The members of the Management Board receive remuneration in accordance with the contract and are also entitled to receive a severance payment: up to 8 months of the remuneration of the Member of the Management Board. Members of the Management Board have no rights related to pension. During the reporting period, no other transactions were made with members of the Group's directing bodies and the persons connected with them.
In June 2018, 124 option agreements were concluded with the Group's employees and members of the Company's management bodies on subscription rights for a total of 351,925 shares. and each of the members of the Supervisory and Management Boards of the Company were issued an option for subscribing to 7,500 shares, comprising 52,500 shares in total. The subscription period for the shares was 16.07.2021. A total of 96 current and former employees of Harju Elekter participated in the share issue related to the exercise of the stock option programme, subscribing for a total of 278,675 shares for 972,576 euros.
In June 2019, 94 option agreements were concluded with the Group's employees and members of the Company's management bodies on subscription rights for a total of 339,100 shares, and each of the members of the Supervisory and Management Boards of the Company were issued an option for subscribing to 8,000 shares, comprising 64,000 shares in total.
In June 2020, additional 66 option agreements were concluded with the Group's employees and members of the Company's management bodies on subscription rights for a total of 347,468 shares, and each of the members of the Supervisory and Management Boards of the Company were issued an option for subscribing to 10,000 shares, comprising 60,000 shares in total.
In June 2021, ten more option agreements were concluded with the members of the management board of the Group company on subscription rights for a total of 100,000 shares. In December of the reporting year, an additional twelve option agreements were entered into with the Group's employees and members of the company's management bodies, for a total of another 35,750 shares.
As at the reporting date, the total number of potential ordinary shares to be issued was 758,968. During the first half of the year, share-based payments recognized as labour costs totalled to 120 (6M 2021: 149) thousand euros, of which the share of the members of the Management and Supervisory Boards was 22 (6M 2021: 30) thousand euros. The pricing of the option is disclosed in Note 8.
The Management Board acknowledges its responsibility for the preparation, integrity and fair presentation of the consolidated interim financial statements for the second quarter and six month of 2022 as set out on pages 15 to 25 and confirms that to the best of its knowledge, information and belief that:
| Tiit Atso | Chairman of the Management Board | 27 July 2022 | |
|---|---|---|---|
| Aron Kuhi-Thalfeldt | Member of the Management Board | 27 July 2022 |
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