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Solar Interim / Quarterly Report 2020
3414_rns_2020-08-12_81c61319-2ecb-4c86-a757-46f27c0ea578.pdf
Interim / Quarterly Report
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Solar A/S
LEI: 21380031XTLI9X5MTY92
Industrivej Vest 43 ■ 6600 Vejen ■ Danmark
Tlf. 79 30 00 00 ■ CVR-nr. 15 90 84 16 ■ Web: www.solar.eu
Meddelelse nr. 15 2020
- august 2020
Korrektion: Delårsrapport Q2 2020
Solar-koncernens forventning til organisk vækst for 2020 udgør ca. -1%.
I selskabsmeddelelse nr. 14 2020 fremgår det af Delårsrapport Q2 2020 på side 11, 1. spalte, fejlagtigt, at forventningen til organisk vækst for 2020 er ca. 0% for Solar-koncernen.
Opdateret Delårsrapport Q2 2020 er vedhæftet denne meddelelse.
Med venlig hilsen
Solar A/S
Jens Andersen
Kontaktpersoner
CEO Jens Andersen - tlf. 79 30 02 01
CFO Michael H. Jeppesen - tlf. 79 30 02 62
Director, Stakeholder Relations Charlotte Risskov Kræfting - tlf. 40 34 29 08
Bilag: Delårsrapport Q2 2020 (på engelsk), side 1-31.
Fakta om Solar
Solar-koncernen er en førende europæisk sourcing- og servicevirksomhed, der leverer løsninger primært inden for el, vvs, ventilation samt klima og energi. Vores kerneforretning centrerer sig om sourcing af produkter, værdiskabende services og optimering af vores kunders forretning.
Vi fremmer effektivitetsforbedringer og tilbyder digitale værktøjer, der gør vores kunder til vindere. Vi driver den grønne omstilling og leverer de bedste løsninger, der sikrer bæredygtig brug af ressourcer.
Solar-koncernen har hovedsæde i Danmark, havde i 2019 en omsætning på ca. 11,7 mia. kroner og beskæftiger ca. 3.000 medarbejdere. Solar er noteret på Nasdaq Copenhagen med kortnavn SOLAR B. Flere oplysninger kan findes på: www.solar.eu.
Ansvarsfraskrivelse
Denne meddelelse er offentliggjort dags dato på dansk og engelsk via Nasdaq Copenhagen. I tilfælde af uoverensstemmelse mellem de to versioner er det den danske version, der er gældende.
1 af 1
Q2 2020
Solar A/S
CVR no. 15 90 84 16
solar
stronger together
SOLAR Q2 2020
Contents
MANAGEMENT'S REVIEW
3 Financial highlights
4 Business update
6 Digital update
7 Financial review
11 Guidance 2020
13 Shareholder information
FINANCIAL STATEMENTS
15 Statement of comprehensive income
16 Balance sheet
17 Cash flow statement
18 Statement of changes in equity
20 Notes
27 Quarterly figures
30 Statement by the Executive Board and the Board of Directors
SOLAR Q2 2020
Financial highlights
| Consolidated (DKK million) | Q2 | H1 | Year | ||
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Revenue | 2,745 | 2,868 | 5,790 | 5,825 | 11,679 |
| Earnings before interest, tax, depreciation and amortisation (EBITDA) | 127 | 104 | 269 | 225 | 538 |
| Earnings before interest, tax and amortisation (EBITA) | 81 | 60 | 178 | 140 | 360 |
| Earnings before interest and tax (EBIT) | 65 | 41 | 147 | 103 | 260 |
| Earnings before tax (EBT) | 153 | 56 | 198 | 49 | 120 |
| Net profit for the period | 141 | 48 | 171 | 28 | 64 |
| Balance sheet total | 5,002 | 5,243 | 5,002 | 5,243 | 4,990 |
| Equity | 1,614 | 1,552 | 1,614 | 1,552 | 1,592 |
| Interest-bearing liabilities, net | 845 | 1,182 | 845 | 1,182 | 921 |
| Cash flow from operating activities, continuing operations | 282 | -17 | 239 | -149 | 300 |
| Net investments in property, plant and equipment | -4 | -25 | -17 | -46 | -110 |
Employees
| Number of employees (FTE), end of period, continuing operations | 2,934 | 3,079 | 2,934 | 3,079 | 3,041 |
|---|---|---|---|---|---|
| Average number of employees (FTE), LTM, continuing operations | 3,024 | 2,984 | 3,024 | 2,984 | 3,039 |
Financial ratios (%, unless otherwise stated)
| Organic growth adjusted for number of working days | -1.6 | 5.6 | 0.0 | 5.6 | 4.9 |
|---|---|---|---|---|---|
| Gross profit margin | 20.5 | 20.2 | 20.5 | 20.1 | 20.1 |
| EBITDA margin | 4.6 | 3.6 | 4.6 | 3.9 | 4.6 |
| EBITA margin | 3.0 | 2.1 | 3.1 | 2.4 | 3.1 |
| Net working capital (NWC at end of period)/revenue (LTM) | 11.9 | 12.9 | 11.9 | 12.9 | 11.0 |
| Gearing (net interest-bearing liabilities/EBITDA), no. of times | 1.5 | 2.6 | 1.5 | 2.6 | 1.7 |
| Return on equity (ROE) | 13.6 | 5.7 | 13.6 | 5.7 | 4.0 |
| Equity ratio | 32.3 | 29.6 | 32.3 | 29.6 | 31.9 |
Employees
| Earnings per share outstanding (EPS) | 19.32 | 6.82 | 23.43 | 3.91 | 8.77 |
|---|---|---|---|---|---|
In general, financial ratios are calculated in accordance with the Danish Finance Society's "Recommendations & Ratios 2019".
Q2 FINANCIAL MESSAGES
- Due to improved gross profit margin, efficiency gains and cost containment we achieved a 35% EBITA increase despite a revenue decrease of DKK 123m.
- Based on the share price on 30 June 2020, the value of BIMobject increased to DKK 204m. Hence, the reversal of a previously performed write-down amounted to DKK 97m and impacted EBT positively.
- New 2020 guidance: revenue of DKK 11.4bn and reiteration of EBITA of DKK 400m.
SOLAR Q2 2020
BUSINESS UPDATE
Successful digital go-live of SAP eWM in Solar Norge
As a digital sourcing and services company we continually invest in digital solutions to optimise customer experience and refine operational excellence. Owing to our digital mindset, we even did a remote and digital go-live of SAP eWM in Solar Norge.
STRATEGIC SUPPLIERS
Our strong partnerships with suppliers mean that we have alternatives to both products and production sites, which ensures our ability to supply. The combination of well-known brands and Solar concepts makes us robust. Even during the COVID-19 pandemic, we are able to maintain our delivery performance.
We have an agile business model, which has proved itself during these challenging times. We have adopted several initiatives to strengthen our gross profit margin.
INDUSTRY FOCUS
Infrastructure has performed very well during the COVID-19 crisis, seeing double-digit organic growth rates in Q2.
In Denmark, we recently extended our agreement with the fibre network company, Fibia. We have served Fibia for several years and the collaboration has developed into a strong strategic partnership about operating and managing large parts of the Fibia supply chain. This enables Fibia to focus on their core business.
OPERATIONAL EXCELLENCE
Over the weekend of 30-31 May, we launched SAP eWM - extended Warehouse Management system - at our central warehouse in Gardermoen in Norway to replace our in-house developed warehouse management system. Overall, the go-live was very successful with only minor disruptions.
Because of our digital mindset, we even did a remote and digital go-live for the first time with only a limited number of people on site. By using all the digital tools in our toolbox and with great support from colleagues with valuable experience from previous implementations, our efforts were successful.
As our final implementation, we expect to implement SAP eWM at our central warehouse in Alkmaar in the Netherlands in Q4.
SOLAR Q2 2020
BUSINESS UPDATE
Combining green initiatives and productivity
We continue to focus on green business opportunities to drive energy transition, support sustainable business and the displacement of fossil fuels.
ENERGY EFFICIENCY AND PRODUCTIVITY
Solar has established a strong position in the market for climate and energy solutions, with Norway being a particularly mature market within electrification.
Solar Norge and EVBox, a global leader in electric vehicle (EV) charging solutions offering hardware, software and services, have therefore joined forces. With EVBox's extensive and impressive portfolio of smart charging stations, Solar is now able to offer fully integrated and intelligent energy solutions within the Norwegian residential and commercial markets.
As a responsible company, we combine our green and productivity agendas wherever possible, which also applies to our fast green deliveries.
In Bergen in Norway, we are now able to deliver Solar Fastbox by electric vehicles as is already the case in Oslo.
Solar Fastbox is a popular service designed to improve customer productivity. It provides a broad assortment and our fast green deliveries mean that we can protect the environment at the same time.
The use of digital tools for ordering products and services enables our customers to manage their working day more efficiently.
SOLAR Q2 2020
DIGITAL UPDATE
Solar Mobile app wins gold at the Danish Digital Awards
As a digital company, we invest in user-friendly tools to enhance the customer experience. Our award-winning app, Solar Mobile, is a handy digital tool for ordering products and services, obtaining technical specifications and accessing support.
The Solar Mobile app recently won two prizes at the Danish Digital Awards in essential categories: Gold in the Commerce category and Silver in the Customer Experience category. The app was also nominated in the Differentiation & Design category. This is an important recognition of our dedicated focus on e-business.
As more than 60% of Solar’s orders are fully digital across key markets, our webshop and app are a dominant part of our business. We therefore welcome the fact that our app has been recognised for its user-friendliness, outstanding customer experience and strong results.
Moreover, our webshop and app are not just valuable tools for our customers but also offer an attractive marketplace for our suppliers.
Being digital is more relevant than ever due to the extraordinary circumstances brought about by COVID-19.
During lockdown and the following period, we saw an increasing interest for online shopping. Thousands of customers downloaded the Solar Mobile app, resulting in an increase of more than 30% in app downloads.
Solar’s strong position within the digital transformation of our industry combined with an efficient logistics setup makes a significant difference. Being a digital company with a continually increasing share of e-business means that our business is fully capable of serving our customers through digital channels.
SOLAR MOBILE
SOLAR A/S
SOLAR Q2 2020
FINANCIAL REVIEW
Q2 EBITA increased by 35% to DKK 81m despite adjusted organic growth of -1.6%
(Figures in brackets are figures from the corresponding period in 2019)
Solar is a digital company and during COVID-19 we have seen the advantages of serving our customers through digital channels. In Q2, we continued our journey towards improved EBITA, delivering an EBITA increase of 35% despite an adjusted organic revenue growth of -1.6% (5.6%) due to demand decline during COVID-19.
Our comments on core and related business and disclosures in the note, Segment information, should be regarded as supplementary information. Information on the following segments - Installation, Industry and Trade - is included in the note, Segment information.
Q2 2020
REVENUE
Solar Danmark, Solar Sverige and Solar Nederland saw positive organic growth in the Industry segment. Despite two-digit organic growth in Infrastructure, the overall adjusted organic growth for Industry was around -3% with Marine, Offshore and OEM delivering negative growth rates.
Solar's overall adjusted organic growth for Installation amounted to around -4%. The Better Business project focuses on supplying the right products to the right customers. As part of this project, we are pruning products, which is one of the reasons for negative growth.
The trade segment delivered solid positive organic growth driven by Special Sales.
In Q2, adjusted organic growth at group level amounted to -1.6% (5.6%). Revenue totalled DKK 2.7bn (DKK 2.9bn).
Core business delivered adjusted organic growth of -1.6% (5.6%), and we saw positive adjusted organic growth in Solar Danmark and Solar Nederland, while Solar Norge, Solar Sverige and Solar Polska saw negative adjusted organic growth.
GROSS PROFIT
Gross profit decreased by DKK 18m but we saw continuous improvement in the gross profit margin, which increased to 20.5% (20.2%) in Q2 2020.
OTHER INCOME
Other income amounted to DKK 2m (DKK 5m). In Q2 2019, the DKK 5m primarily related to the net impact of the acquisition of Swedish business activities.
EXTERNAL OPERATING COSTS AND STAFF COSTS
Due to COVID-19, we launched several prudent cost-saving measures to protect short-term earnings and to deliver cash generation primarily through the furlough scheme, initiating a hiring freeze, reducing the use of temporary staff and general cost containment.
External operating costs and staff costs were down by DKK 42m compared to last year. Of this, foreign exchange translation adjustments accounted for DKK 10m and cost savings for DKK 27m. We were granted DKK 12m from furlough schemes. In addition, SAP eWM rollout costs amounted to approx. DKK 7m.
RELATED BUSINESS*
Revenue from related business amounts to approx. 5% of our total revenue.
MAG45 delivered EBITA of DKK 0m in Q2 and EBITA of DKK 1m in H1 despite additional restructuring initiatives, which had a negative impact of approx. DKK 2m in H1.
We continue to see a positive effect of the substantial reorganisation in MAG45 - leading to an ongoing improvement in profitability.
In H2 2019, we initiated a strategic review of MAG45. Due to the COVID-19 pandemic, we put the review on hold in Q2. We expect to relaunch the strategic review in H2 2020.
Related business showed adjusted organic growth of -0.9% (6.3%) for Q2 and -0.7% (6.4%) for H1. EBITA increased to DKK 1m (DKK-6m) for Q2 and to DKK 1m (DKK -7m) for H1.
*Besides MAG45 our related business also includes Solar Polaris.
SOLAR Q2 2020
FINANCIAL REVIEW
Part of the cost savings are temporary savings and are expected to be partly normalised as the impact of COVID-19 diminishes.
Solar Norge and Solar Danmark ended their furlough schemes at the end of April and the end of June respectively, while the furlough schemes in Solar Sverige and MAG45 were still in operation at the end of Q2.
In Q2 2019, the acquisition of Swedish business activities in May 2019 affected costs in general.
LOSS ON TRADE RECEIVABLES
Solar conducts efficient credit management at all times and in March, we tightened our credit policy due to the COVID-19 pandemic. Furthermore, the vast majority of our companies have in general taken out insurance to hedge against potential losses on trade receivables.
Impacts from COVID-19 have increased risks on trade receivables but in Q2 2020, loss on trade receivables remained at a normal level.
EBITA
EBITA increased to DKK 81m (DKK 60m) corresponding to an EBITA margin of 3.0% (2.1%) of revenue.
We succeeded in increasing EBITA by DKK 21m due to an improved gross profit margin, efficiency gains and cost containment despite a revenue decrease of DKK 123m.
EBITA from core business was up at DKK 80m (DKK 66m) corresponding to an EBITA margin of 3.1% (2.4%). This was driven by improvements in Solar Danmark, Solar Sverige and Solar Norge.
As expected, Solar Danmark's and Solar Norge's financial performances were negatively affected by roll-out costs for SAP eWM of approx. DKK 2m and approx. DKK 5m respectively.
In Solar Nederland, the change in customer and product mix affected earnings by DKK -9m, which was partly offset by cost savings of DKK 4m.
The results from the individual countries are given on pages 22-23.
IMPAIRMENT ON ASSOCIATES
Based on the share price on 30 June 2020, the value of BIMobject increased to DKK 204m. Hence, the reversal of a previously performed write-down amounted to DKK 97m (DKK 29m).
EARNINGS BEFORE TAX
Earnings before tax were up at DKK 153m (DKK 56m) and when adjusted - as illustrated in the table below - earnings before tax were up at DKK 56m (DKK 27m).
| DKK million | Q2 2020 | Q2 2019 | Year 2019 |
|---|---|---|---|
| Earnings before tax | 153 | 56 | 120 |
| Impact due to market value changes in BIMobject: | |||
| Impairment on associates | -97 | -29 | 86 |
| Earnings before tax, adjusted for impact from associates | 56 | 27 | 206 |
| Impairment loss, other intangible assets | 0 | 0 | 21 |
| Impairment loss, goodwill and customers list | 0 | 0 | 4 |
| Adjusted earnings before tax | 56 | 27 | 231 |
NET PROFIT
Profit from continuing operations came to DKK 141m (DKK 48m).
H1 2020
REVENUE
Solar's overall adjusted organic growth for Installation amounted to around -1%. For Industry, it was also around -1%. Growth has been adjusted for the estimated impact of the acquired business activities in Sweden.
In H1, adjusted organic growth at group level amounted to 0% (5.6%). Revenue was unchanged at DKK 5.8bn.
Core business delivered adjusted organic growth of 0% (5.6%), and we saw positive adjusted organic growth in Solar Danmark and Solar Nederland, while Solar Norge, Solar Sverige and Solar Polska saw negative adjusted organic growth.
GROSS PROFIT
Gross profit increased by DKK 12m and we saw continuous improvement in the gross profit margin, which increased to 20.5% (20.1%) in H1 2020.
OTHER INCOME
Other income amounted to DKK 10m (DKK 5m). Of this, DKK 7m is the outcome of a settlement with the former shareholder of MAG45, see Annual Report 2019, the note on litigation.
In Q2 2019, the DKK 5m primarily related to the net impact of the acquisition of the Swedish business activities.
EXTERNAL OPERATING COSTS AND STAFF COSTS
In Q2, we launched several prudent cost-saving measures due to COVID-19, see page 7.
In H1 2020, furlough schemes of DKK 13m affected cost development.
In H1 2019, the acquisition of Swedish business activities in May 2019 impacted costs in general.
EBITA
EBITA increased to DKK 178m (DKK 140m) corresponding to an EBITA margin of 3.1% (2.4%) of revenue.
EBITA from core business was up at DKK 177m (DKK 147m) corresponding to an EBITA margin of 3.2% (2.7%). This was driven by improvements in Solar Danmark, Solar Sverige and Solar Norge.
As expected, Solar Danmark's and Solar Norge's financial performances were negatively affected by roll-out costs for SAP eWM of approx. DKK 9m and approx. DKK 7m respectively. Overall, we continue to expect one-off costs of DKK 30m relating to SAP eWM implementations in 2020.
In Solar Nederland, a change in the customer and product mix affected earnings by DKK -6m. Restructuring costs and costs relating to the implementation of AutoStore, an automated storage and retrieval system, of approx. DKK 6m also negatively affected the performance of Solar Nederland.
The results of the individual countries are disclosed on pages 22-23.
IMPAIRMENT ON ASSOCIATES
Based on the share price on 30 June 2020, the value of BIMobject amounted to DKK 204m. Hence, in H1 2020 the reversal of a previously performed write-down amounted to DKK 73m while in H1 2019, write-down amounted to DKK -28m.
EARNINGS BEFORE TAX
Earnings before tax were up at DKK 198m (DKK 49m) and when adjusted - as illustrated in the
SOLAR Q2 2020
FINANCIAL REVIEW
table below - earnings before tax were up at DKK 125m (DKK 77m).
| DKK million | H1 2020 | H1 2019 | Year 2019 |
|---|---|---|---|
| Earnings before tax | 198 | 49 | 120 |
| Impact due to market value changes in BIMobject: | |||
| Impairment on associates | -73 | 28 | 86 |
| Earnings before tax, adjusted for impact from associates | 125 | 77 | 206 |
| Impairment loss, other intangible assets | 0 | 0 | 21 |
| Impairment loss, goodwill and customers list | 0 | 0 | 4 |
| Adjusted earnings before tax | 125 | 77 | 231 |
NET PROFIT
Profit from continuing operations came to DKK 171m (DKK 30m). Losses from discontinued operations amounted to DKK 0m (DKK -2m). Net profit for the Solar Group thus increased to DKK 171m (DKK 28m).
CASH FLOW
Net working capital calculated as an average of the previous four quarters amounted to 11.9% (11.4%) of revenue. Net working capital at the end of Q2 2020 decreased to 11.9% (12.9%).
In H1, cash flow from operating activities totalled DKK 239m (DKK -149m) affected by changes to receivables of DKK -91m (DKK -246m). Receivables are affected by negative organic growth in June 2020 and by normal seasonal fluctuations. The cash flow from non-interest-bearing debt was positively affected by DKK 60m due to COVID-19 financial support packages.
Total cash flow from investing activities amounted to DKK -43m (DKK -106m). Purchase of property, plant and equipment amounted to DKK -18m (DKK -46m) and was impacted by the implementation of AutoStore in Solar Nederland in H1 2020 and in Solar Norge in H1 2019. In H1 2019, the divestment of STI had a positive impact of DKK 5m, the acquisition of the Swedish business activities had a negative impact of DKK 40m and further investments in our existing financial investments impacted negatively at DKK 7m.
Cash flow from financing activities was affected by dividend distributions of DKK 102m (DKK 102m) and by the change in current interest-bearing debt of DKK 54m (DKK 405m). Cash flow from financing activities totalled DKK -114m (DKK 242m).
Cash flow from discontinued operations amounted to DKK 0m (DKK -2m). Consequently, total cash flow amounted to DKK 82m (DKK -15m).
Net interest-bearing liabilities were down at DKK 845m (DKK 1,182m). Over the past 12 months, we have
- invested DKK 41m in digital improvements;
- invested DKK 82m in optimising our operations e.g. AutoStore;
- paid dividend of DKK 102m.
As at 30 June 2020, gearing was 1.5 (2.6) times EBITDA. Calculated as an average, gearing amounted to 1.7 (1.9) times EBITDA. Our gearing target is 1.5-3.0 times EBITDA.
As at 30 June 2020, Solar had undrawn credit facilities of DKK 469m.
Invested capital for the Solar Group totalled DKK 2,178m (DKK 2,461m).
ROIC amounted to 10.2% (7.9%). ROIC for core business amounted to 12.3%.
Activities with a Solar equity interest of less than 50% and discontinued activities are not included in the ROIC calculation. Invested capital only includes operating assets and liabilities.
KEY RISKS AND MITIGATION
Like other international companies, Solar is affected by both global trends and local conditions in the markets where we operate. The COVID-19 pandemic has impacted the entire world and Solar is affected by the challenges this has brought about.
In mid-March, we began to see a gradual decline in order lines. Revenue, however, remained stable. This changed in the last week of March when we began to see a slightly declining revenue in some markets. Consequently, we decided to implement a furlough scheme in several markets at the end of March. Later, activity levels increased and employees are gradually returning to work.
During this period, we have adopted a number of initiatives to limit the risk of infection, safeguard business continuity and protect earnings.
Based on developments in late March, we withdrew our previously announced outlook for 2020 (see announcement no. 6 2020 dated 27 March). We are now publishing new guidance for 2020 - see page 11.
DIVESTMENTS AND ACQUISITIONS
Acquisition of Swedish business activities
On 15 May 2019, Solar acquired selected parts of Onninen AB's Swedish business activities. In 2019, we saw full-year revenue of approx. DKK 300m. As the acquired activities are fully integrated into Solar Sverige, we estimated the 2019 EBITA impact to be approx. DKK -10m due to integration and restructuring costs.
Divestment of Norwegian training business
In March 2019, Solar concluded the process, initiated in December 2018, of a management buyout of our Norwegian training business, Scandinavian Technology Institute (STI), part of our related business. The divestment constituted a loss of DKK 17m, which was recognised in the Solar Group's income statement as part of the loss from discontinued operations in Q4 2018.
SOLAR Q2 2020
FINANCIAL REVIEW
The COVID-19 pandemic has increased the risk of impairment losses. However, the completed tests of intangible assets showed no need for impairment.
Besides COVID-19, other commercial and financial risks relating to our activities are detailed in Solar's Annual Report 2019.
EVENTS OCCURRING AFTER THE REPORTING PERIOD
The fact that Solar is fundamentally a digital company with an agile business model was proved again in July.
We were pleased to see that the initiatives to protect short-term earnings and cash generation – mainly the hiring freeze, reduction in the use of temporary staff and general cost containment including initiatives to strengthen our gross margin – continue to pay off.
As expected, we saw negative organic growth but we managed to strengthen the earnings compared to July 2019.
The earnings were in line with our expectations and support our guidance.
SOLAR Q2 2020
GUIDANCE 2020
New 2020 guidance: revenue of DKK 11.4bn and reiteration of EBITA of DKK 400m
(Figures in brackets are corresponding figures from the guidance withdrawn in March 2020)
For the Solar Group, we reiterate EBITA of DKK 400m, still including one-off costs of DKK 30m related to SAP eWM implementations. We expect revenue of DKK 11,400m (DKK 11,800m) corresponding to organic growth of approx. -1% (1%).
Based on developments in late March, we withdrew our previously announced outlook for 2020 of 27 March. Due to the COVID-19 pandemic we see an increased risk in the market outlook for 2020 compared to 2019. The new guidance is based on several assumptions.
GENERAL ASSUMPTIONS
The new guidance for 2020 is based on the assumption that no significant resurgence of COVID-19 resulting in new lockdowns will take place in our markets.
As stated on pages 7-8, we have launched several initiatives to strengthen the gross profit margin in combination with cost containment. In the most recent quarters, we have seen steady improvements in gross profit margin. The new guidance is based on the assumption that we will continue to see such improvements throughout H2 2020.
Part of the cost savings seen in Q2 2020 are temporary savings, and we assume costs to be partly normalised during H2 2020 albeit still at a lower level than H2 2019.
In H1 2020, we received DKK 13m from furlough schemes, whereas we only expect a minor sum from these in H2 2020.
In addition, the new guidance does not include any significant restructuring costs.
Loss on trade receivables is assumed to be at the same level as in H1 2020.
MARKET OUTLOOK FOR SOLAR'S BUSINESS AREAS
Even prior to COVID-19, our main risk was the general development in the Swedish market. The knock-on effects from COVID-19 elevated this risk. Our assessment is that our other markets carry a lower risk level.
Overall, we expect the installation and industry markets to be at a lower level in 2020 than in 2019.
Installation
During Q2, service sales saw a slight decline. We expect this trend to change and for service sales to gradually normalise in H2 to pre-COVID-19 levels. Project sales are expected to remain at the current level, which is in line with our initial expectations.
Industry
The new guidance is based on the assumption that sales to OEM, Marine and Offshore will improve. Infrastructure is expected to continue to deliver strong growth rates in H2.
Trade
We expect growth in Special Sales, which is the primary activity in the Trade segment.
FINANCIAL OUTLOOK 2020
Core business, revenue guidance
For core business, we expect revenue at DKK 10,850m (DKK 11.200m), corresponding to organic growth of approx. -1% (approx. 1%). Pruning products is part of our Better Business project, and this is expected to reduce revenue by DKK 200m (DKK 200m) compared to 2019. Adjusted for this, we expect underlying organic growth of approx. 1% (approx. 3%).
Core business, EBITA guidance
We expect unchanged EBITA of DKK 400m, still including total one-off costs of DKK 30m related to our SAP eWM implementations in Denmark, Norway and the Netherlands.
Consequently, we expect core business to deliver an operating EBITA of DKK 430m corresponding to an EBITA margin of 4.0% (3.8%), which is in line with our target of 4%.
Related business, guidance
For related business, we expect revenue of around DKK 550m (DKK 600m), organic growth in the
SOLAR Q2 2020
GUIDANCE 2020
region of -2% (approx. 3%) and an unchanged EBITA of DKK 0m.
MAG45 has seen decreasing growth during the latter part of Q2 2020. The order backlog remained close to an all-time high by the end of June. We expect MAG45 to make a gradual return to growth. Regarding the strategic review of MAG45, see page 7.
Solar Group, guidance
In total, we expect revenue of DKK 11,400m (DKK 11,800m) equal to organic growth of approx. -1% (approx. 1%). We expect an unchanged EBITA of DKK 400m, including one-off costs of DKK 30m related to SAP eWM implementations.
This means that our H2 2020 EBITA guidance matches the actual H2 2019 EBITA despite the fact that we expect a DKK 244m lower revenue in H2 2020 compared to H2 2019. We expect this achievement to derive from initiatives to strengthen gross profit margin in combination with efficiency gains and cost containment.
| DKK million | New guidance 2020 | Withdrawn guidance 2020 | Actual 2019 |
|---|---|---|---|
| Core business | |||
| Revenue | 10,850 | 11,200 | 11,116 |
| EBITA | 400 | 400 | 379 |
| Related business | |||
| Revenue | 550 | 600 | 563 |
| EBITA | 0 | 0 | -19 |
| Solar Group | |||
| Revenue | 11,400 | 11,800 | 11,679 |
| EBITA | 400 | 400 | 360 |
SOLAR Q2 2020
SHAREHOLDER INFORMATION
Share and webcast information
SOLAR'S SHARES
Solar's share capital is divided into nominal value DKK 90 million A shares and nominal value DKK 646 million B shares.
The A shares are not listed. The B shares are listed on Nasdaq Copenhagen under the ID code DK0010274844, and are designated SOLAR B, and form part of the MidCap index and MidCap on Nasdaq Nordic.
The share capital includes 900,000 A shares and 6,460,000 B shares. Solar's portfolio of treasury shares totals 61,708 B shares or 0.8% of share capital.
A shares have 10 votes per share amount of DKK 100, while B shares have 1 vote per share amount of DKK 100.
TOTAL SHAREHOLDER RETURN
The total shareholder return of the Solar B share during the holding period 1 January 2020 - 30 June 2020 was DKK -28.26 as DKK 14.00 was paid out in dividend and the share price decrease amounted to DKK -42.26 in H1 2020.
Comparable companies have seen a similar development in their share price as the COVID-19 pandemic is affecting the stock market in general.
AUDIO WEBCAST
The presentation of the Quarterly Report Q2 2020 will be conducted in English on 12 August 2020 at 11:00 CET. The presentation will be transmitted as an audio webcast and will be available at www.solar.eu.
FINANCIAL CALENDAR 2020
| 4 October - 4 November | IR quiet period |
|---|---|
| 4 November | Quarterly Report Q3 2020 |
DISTRIBUTION OF SHARE CAPITAL AND VOTES BASED ON THE LATEST PUBLIC INFORMATION
| Holdings of 5% or more of share capital | Share capital in % | Votes in % |
|---|---|---|
| The Fund of 20th December, Vejen, Denmark | 16.9% | 60.0% |
| RWC Asset Management LLP, London, England | 14.7% | 7.0% |
| Nordea Funds Ltd., Helsinki, Finland | 10.4% | 5.0% |
| Investeringsforeningen Nordea Invest, Copenhagen, Denmark | 5.0% | 2.4% |
Consolidated financial statements
SOLAR Q2 2020
Statement of comprehensive income
Income statement
| DKK million | Q2 | H1 | Year | ||
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Revenue | 2,745 | 2,868 | 5,790 | 5,825 | 11,679 |
| Cost of sales | -2,183 | -2,288 | -4,605 | -4,652 | -9,326 |
| Gross profit | 562 | 580 | 1,185 | 1,173 | 2,353 |
| Other operating income and costs | 2 | 5 | 10 | 5 | 9 |
| External operating costs | -61 | -88 | -153 | -181 | -329 |
| Staff costs | -372 | -387 | -763 | -761 | -1,477 |
| Loss on trade receivables | -4 | -6 | -10 | -11 | -18 |
| Earnings before interest, tax, depreciation and amortisation (EBITDA) | 127 | 104 | 269 | 225 | 538 |
| Depreciation and write-down on property, plant and equipment | -46 | -44 | -91 | -85 | -178 |
| Earnings before interest, tax and amortisation (EBITA) | 81 | 60 | 178 | 140 | 360 |
| Amortisation and impairment of intangible assets | -16 | -19 | -31 | -37 | -100 |
| Earnings before interest and tax (EBIT) | 65 | 41 | 147 | 103 | 260 |
| Share of net profit from associates | -3 | -5 | -8 | -10 | -19 |
| Impairment on associates | 97 | 29 | 73 | -28 | -86 |
| Financial income | 6 | 4 | 15 | 8 | 18 |
| Financial expenses | -12 | -13 | -29 | -24 | -53 |
| Earnings before tax (EBT) | 153 | 56 | 198 | 49 | 120 |
| Income tax | -12 | -8 | -27 | -19 | -54 |
| Profit or loss of continuing operations | 141 | 48 | 171 | 30 | 66 |
| Loss of discontinued operations | 0 | 0 | 0 | -2 | -2 |
| Net profit for the period | 141 | 48 | 171 | 28 | 64 |
| Earnings in DKK per share outstanding (EPS) | 19.32 | 6.82 | 23.43 | 3.91 | 8.77 |
| Diluted earnings in DKK per share outstanding (EPS-D) | 19.31 | 6.82 | 23.42 | 3.91 | 8.77 |
| Earnings in DKK per share outstanding (EPS) of continuing operations | 19.32 | 6.82 | 23.43 | 4.19 | 9.04 |
| Diluted earnings in DKK per share outstanding (EPS-D) of continuing operations | 19.31 | 6.82 | 23.42 | 4.19 | 9.04 |
Other comprehensive income
| DKK million | Q2 | H1 | Year | ||
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Net profit for the period | 141 | 48 | 171 | 28 | 64 |
| Other income and costs recognised: | |||||
| Items that can be reclassified for the income statement | |||||
| Foreign currency translation adjustments of foreign subsidiaries | 33 | -4 | -42 | -1 | 0 |
| Fair value adjustments of hedging instruments before tax | -2 | -8 | -7 | -14 | -10 |
| Tax on fair value adjustments of hedging instruments | 1 | 1 | 2 | 3 | 2 |
| Other income and costs recognised after tax | 32 | -11 | -47 | -12 | -8 |
| Total comprehensive income for the period | 173 | 37 | 124 | 16 | 56 |
SOLAR Q2 2020
Balance sheet
| DKK million | 30.06 | 31.12 | |
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| ASSETS | |||
| Intangible assets | 307 | 360 | 315 |
| Property, plant and equipment | 836 | 833 | 865 |
| Right-of-use assets | 292 | 304 | 341 |
| Deferred tax asset | 10 | 10 | 10 |
| Investments in associates | 215 | 217 | 146 |
| Other non-current assets | 75 | 68 | 79 |
| Non-current assets | 1,735 | 1,792 | 1,756 |
| Inventories | 1,551 | 1,635 | 1,666 |
| Trade receivables | 1,496 | 1,679 | 1,428 |
| Income tax receivable | 19 | 15 | 14 |
| Other receivables | 9 | 27 | 8 |
| Prepayments | 54 | 48 | 62 |
| Cash at bank and in hand | 138 | 47 | 56 |
| Current assets | 3,267 | 3,451 | 3,234 |
| Total assets | 5,002 | 5,243 | 4,990 |
| DKK million | 30.06 | 31.12 | |
| --- | --- | --- | --- |
| 2020 | 2019 | 2019 | |
| EQUITY AND LIABILITIES | |||
| Share capital | 736 | 736 | 736 |
| Reserves | -226 | -183 | -179 |
| Retained earnings | 1,104 | 999 | 933 |
| Proposed dividends for the financial year | 0 | 0 | 102 |
| Equity | 1,614 | 1,552 | 1,592 |
| Interest-bearing liabilities | 151 | 401 | 156 |
| Lease liabilities | 193 | 183 | 231 |
| Provision for pension obligations | 0 | 2 | 0 |
| Provision for deferred tax | 100 | 113 | 103 |
| Other provisions | 13 | 14 | 13 |
| Non-current liabilities | 457 | 713 | 503 |
| Interest-bearing liabilities | 539 | 524 | 477 |
| Lease liabilities | 100 | 121 | 113 |
| Trade payables | 1,664 | 1,848 | 1,814 |
| Income tax payable | 26 | 7 | 10 |
| Other payables | 590 | 458 | 464 |
| Prepayments | 5 | 5 | 4 |
| Other provisions | 7 | 15 | 13 |
| Current liabilities | 2,931 | 2,978 | 2,895 |
| Liabilities | 3,388 | 3,691 | 3,398 |
| Total equity and liabilities | 5,002 | 5,243 | 4,990 |
SOLAR Q2 2020
Cash flow statement
| DKK million | Q2 | H1 | Year | ||
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Net profit or loss of continuing operations for the period | 141 | 48 | 171 | 30 | 66 |
| Write-down negative goodwill | 0 | -18 | 0 | -18 | -18 |
| Depreciation, write-down and amortisation | 62 | 63 | 122 | 122 | 278 |
| Impairment on associates | -97 | -29 | -73 | 28 | 86 |
| Changes to provisions and other adjustments | -1 | 14 | -9 | 11 | -6 |
| Share of net profit from associates | 3 | 5 | 8 | 10 | 19 |
| Financials, net | 6 | 9 | 14 | 16 | 35 |
| Income tax | 12 | 8 | 27 | 19 | 54 |
| Financial income, received | 1 | 2 | 3 | 4 | 8 |
| Financial expenses, settled | -9 | -10 | -18 | -18 | -41 |
| Income tax, settled | -4 | -15 | -17 | -27 | -62 |
| Cash flow before working capital changes | 114 | 77 | 228 | 177 | 419 |
| Working capital changes | |||||
| Inventory changes | 0 | -4 | 85 | -51 | -92 |
| Receivables changes | 212 | 33 | -91 | -246 | 21 |
| Non-interest-bearing liabilities changes | -44 | -123 | 17 | -29 | -48 |
| Cash flow from operating activities, continuing operations | 282 | -17 | 239 | -149 | 300 |
| Cash flow from operating activities, discontinued operations | 0 | 0 | 0 | -2 | -2 |
| Cash flow from operating activities | 282 | -17 | 239 | -151 | 298 |
| DKK million | Q2 | H1 | Year | ||
| --- | --- | --- | --- | --- | --- |
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Investing activities | |||||
| Purchase of intangible assets | -12 | -8 | -24 | -18 | -35 |
| Purchase of property, plant and equipment | -4 | -25 | -18 | -46 | -110 |
| Disposal of property, plant and equipment | 0 | 0 | 1 | 0 | 0 |
| Acquisition of subsidiaries and activities | 0 | -40 | 0 | -40 | -40 |
| Acquisition of associates | -2 | 0 | -2 | 0 | 0 |
| Divestment of subsidiaries and activities | 0 | 0 | 0 | 5 | 5 |
| Other financial investments | 0 | -5 | 0 | -7 | -14 |
| Cash flow from investing activities, continuing operations | -18 | -78 | -43 | -106 | -194 |
| Cash flow from investing activities, discontinued operations | 0 | 0 | 0 | 0 | 0 |
| Cash flow from investing activities | -18 | -78 | -43 | -106 | -194 |
| Financing activities | |||||
| Repayment of non-current interest-bearing debt | -3 | -3 | -5 | -5 | -9 |
| Change in current interest-bearing debt | -166 | 113 | 54 | 405 | 118 |
| Instalment on lease liabilities | -29 | -28 | -61 | -56 | -117 |
| Dividends distributed | 0 | 0 | -102 | -102 | -102 |
| Cash flow from financing activities, continuing operations | -198 | 82 | -114 | 242 | -110 |
| Cash flow from financing activities, discontinued operations | 0 | 0 | 0 | 0 | 0 |
| Cash flow from financing activities | -198 | 82 | -114 | 242 | -110 |
| Total cash flow | 66 | -13 | 82 | -15 | -6 |
| Cash at bank and in hand at the beginning of the period | 72 | 60 | 56 | 65 | 65 |
| Assumed on disposal of subsidiaries | 0 | 0 | 0 | -3 | -3 |
| Foreign currency translation adjustments | 0 | 0 | 0 | 0 | 0 |
| Cash at bank and in hand at the end of the period | 138 | 47 | 138 | 47 | 56 |
| Cash at bank and in hand at the end of the period | |||||
| Cash at bank and in hand | 138 | 47 | 138 | 47 | 56 |
| Cash at bank and in hand at the end of the period | 138 | 47 | 138 | 47 | 56 |
SOLAR Q2 2020
Statement of changes in equity
| DKK million | Share capital | Reserves for hedging transactions¹ | Reserves for foreign currency translation adjustments¹ | Retained earnings | Proposed dividends | Total |
|---|---|---|---|---|---|---|
| 2020 | ||||||
| Equity as at 1 January | 736 | -66 | -113 | 933 | 102 | 1,592 |
| Foreign currency translation adjustments of foreign subsidiaries | -42 | -42 | ||||
| Fair value adjustments of hedging instruments before tax | -7 | -7 | ||||
| Tax on fair value adjustments | 2 | 2 | ||||
| Net income recognised in equity via other comprehensive income in the statement of comprehensive income | 0 | -5 | -42 | 0 | 0 | -47 |
| Net profit for the period | 171 | 171 | ||||
| Comprehensive income | 0 | -5 | -42 | 171 | 0 | 124 |
| Distribution of dividends (DKK 14.00 per share) | -102 | -102 | ||||
| Transactions with the owners | 0 | 0 | 0 | 0 | -102 | -102 |
| Equity as at 30 June | 736 | -71 | -155 | 1,104 | 0 | 1,614 |
1) Reserves for hedging transactions and reserves for foreign currency translation adjustments are recognised in the balance sheet as a total amount under reserves.
SOLAR Q2 2020
Statement of changes in equity
- continued
| DKK million | Share capital | Reserves for hedging transactions1 | Reserves for foreign currency translation adjustments1 | Retained earnings | Proposed dividends | Total |
|---|---|---|---|---|---|---|
| 2019 | ||||||
| Equity as at 1 January | 775 | -58 | -113 | 932 | 102 | 1,638 |
| Foreign currency translation adjustments of foreign subsidiaries | -1 | -1 | ||||
| Fair value adjustments of hedging instruments before tax | -14 | -14 | ||||
| Tax on fair value adjustments | 3 | 3 | ||||
| Net income recognised in equity via other comprehensive income in the statement of comprehensive income | 0 | -11 | -1 | 0 | 0 | -12 |
| Net profit for the period | 28 | 28 | ||||
| Comprehensive income | 0 | -11 | -1 | 28 | 0 | 16 |
| Distribution of dividends (DKK 14.00 per share) | -102 | -102 | ||||
| Deduction in share capital | -39 | 39 | 0 | |||
| Transactions with the owners | -39 | 0 | 0 | 39 | -102 | -102 |
| Equity as at 30 June | 736 | -69 | -114 | 999 | 0 | 1,552 |
1) Reserves for hedging transactions and reserves for foreign currency translation adjustments are recognised in the balance sheet as a total amount under reserves.
SOLAR Q2 2020
Notes
Segment information
Solar's business segments are Installation, Industry and Trade and are based on the customers' affiliation with the segments. Installation covers installation of electrical, and heating and plumbing products, while Industry covers industry, offshore and marine, and utility and infrastructure. Trade covers other small areas. The three main segments have been identified without aggregation of operating segments. Segment income and costs include any items that are directly attributable to the individual segment and any items that can be reliably allocated to the individual segment. Non-allocated costs refer to income and costs related to joint group functions. Assets and liabilities are not included in segment reporting.
| DKK million | Installation | Industry | Trade | Total |
|---|---|---|---|---|
| Q2 2020 | ||||
| Revenue | 1,701 | 837 | 207 | 2,745 |
| Cost of sales | -1,370 | -644 | -169 | -2,183 |
| Gross profit | 331 | 193 | 38 | 562 |
| Direct costs | -57 | -24 | -5 | -86 |
| Earnings before indirect costs | 274 | 169 | 33 | 476 |
| Indirect costs | -139 | -41 | -13 | -193 |
| Segment profit | 135 | 128 | 20 | 283 |
| Non-allocated costs | -156 | |||
| Earnings before interest, tax, depreciation and amortisation (EBITDA) | 127 | |||
| Depreciation and amortisation | -62 | |||
| Earnings before interest and tax (EBIT) | 65 | |||
| Financials, net, and impact from associates | 88 | |||
| Earnings before tax (EBT) | 153 | |||
| DKK million | Installation | Industry | Trade | Total |
| --- | --- | --- | --- | --- |
| Q2 2019 | ||||
| Revenue | 1,826 | 888 | 154 | 2,868 |
| Cost of sales | -1,488 | -683 | -117 | -2,288 |
| Gross profit | 338 | 205 | 37 | 580 |
| Direct costs | -66 | -28 | -5 | -99 |
| Earnings before indirect costs | 272 | 177 | 32 | 481 |
| Indirect costs | -154 | -45 | -12 | -211 |
| Segment profit | 118 | 132 | 20 | 270 |
| Non-allocated costs | -166 | |||
| Earnings before interest, tax, depreciation and amortisation (EBITDA) | 104 | |||
| Depreciation and amortisation | -63 | |||
| Earnings before interest and tax (EBIT) | 41 | |||
| Financials, net, and impact from associates | 15 | |||
| Earnings before tax (EBT) | 56 |
SOLAR Q2 2020
Notes
Segment information - continued
| DKK million | Installation | Industry | Trade | Total |
|---|---|---|---|---|
| H1 2020 | ||||
| Revenue | 3,556 | 1,773 | 461 | 5,790 |
| Cost of sales | -2,864 | -1,366 | -375 | -4,605 |
| Gross profit | 692 | 407 | 86 | 1,185 |
| Direct costs | -124 | -51 | -11 | -186 |
| Earnings before indirect costs | 568 | 356 | 75 | 999 |
| Indirect costs | -283 | -87 | -25 | -395 |
| Segment profit | 285 | 269 | 50 | 604 |
| Non-allocated costs | -335 | |||
| Earnings before interest, tax, depreciation and amortisation (EBITDA) | 269 | |||
| Depreciation and amortisation | -122 | |||
| Earnings before interest and tax (EBIT) | 147 | |||
| Financials, net, and impact from associates | 51 | |||
| Earnings before tax (EBT) | 198 | |||
| DKK million | Installation | Industry | Trade | Total |
| --- | --- | --- | --- | --- |
| H1 2019 | ||||
| Revenue | 3,600 | 1,825 | 400 | 5,825 |
| Cost of sales | -2,932 | -1,411 | -309 | -4,652 |
| Gross profit | 668 | 414 | 91 | 1,173 |
| Direct costs | -130 | -55 | -10 | -195 |
| Earnings before indirect costs | 538 | 359 | 81 | 978 |
| Indirect costs | -300 | -88 | -23 | -411 |
| Segment profit | 238 | 271 | 58 | 567 |
| Non-allocated costs | -342 | |||
| Earnings before interest, tax, depreciation and amortisation (EBITDA) | 225 | |||
| Depreciation and amortisation | -122 | |||
| Earnings before interest and tax (EBIT) | 103 | |||
| Financials, net | -54 | |||
| Earnings before tax (EBT) | 49 |
SOLAR Q2 2020
Notes
Segment information – continued
Geographical information
Solar A/S primarily operates on the Danish, Swedish, Norwegian and Dutch markets. In the below table, Other markets covers the remaining markets, which can be seen in the companies overview available on page 133 of Annual Report 2019. The below allocation has been made based on the products' place of sale. Geographical information as well as information on core business and related business should be regarded as supplementary information.
| DKK million | Revenue | Adjusted organic growth | EBITA | EBITA margin | Non-current assets |
|---|---|---|---|---|---|
| Q2 2020 | |||||
| Denmark | 865 | 1.9 | 51 | 5.9 | 2,101 |
| Sweden | 607 | -4.8 | 5 | 0.8 | 322 |
| Norway | 430 | -5.0 | 11 | 2.6 | 172 |
| The Netherlands | 694 | 0.6 | 12 | 1.7 | 363 |
| Poland | 84 | -14.5 | 0 | 0.0 | 30 |
| Other markets | 9 | 16.4 | 1 | 11.1 | 5 |
| Eliminations | -83 | - | 0 | 0.0 | -1,313 |
| Core business | 2,606 | -1.6 | 80 | 3.1 | 1,680 |
| Several markets (MAG45) | 134 | -0.7 | 0 | 0.0 | 54 |
| Other markets | 5 | - | 1 | 20.0 | 1 |
| Related business | 139 | -0.9 | 1 | 0.7 | 55 |
| Solar Group | 2,745 | -1.6 | 81 | 3.0 | 1,735 |
| DKK million | Revenue | Adjusted organic growth | EBITA | EBITA margin | Non-current assets |
| --- | --- | --- | --- | --- | --- |
| Q2 2019 | |||||
| Denmark | 844 | 4.0 | 42 | 5.0 | 2,116 |
| Sweden | 633 | 3.2 | -4 | -0.6 | 335 |
| Norway | 484 | 14.3 | 9 | 1.9 | 209 |
| The Netherlands | 713 | 4.4 | 17 | 2.4 | 313 |
| Poland | 94 | 1.3 | 1 | 1.1 | 35 |
| Other markets | 7 | 15.1 | 1 | 14.3 | 5 |
| Eliminations | -53 | - | 0 | 0.0 | -1,291 |
| Core business | 2,722 | 5.6 | 66 | 2.4 | 1,722 |
| Several markets (MAG45) | 140 | 4.6 | -5 | -3.6 | 69 |
| Other markets | 6 | - | -1 | -16.7 | 1 |
| Related business | 146 | 6.3 | -6 | -4.1 | 70 |
| Solar Group | 2,868 | 5.6 | 60 | 2.1 | 1,792 |
SOLAR Q2 2020
Notes
Segment information – continued
| DKK million | Revenue | Adjusted organic growth | EBITA | EBITA margin | Non-current assets |
|---|---|---|---|---|---|
| H1 2020 | |||||
| Denmark | 1,811 | 3.0 | 111 | 6.1 | 2,101 |
| Sweden | 1,249 | -3.3 | 17 | 1.4 | 322 |
| Norway | 905 | -3.4 | 26 | 2.9 | 172 |
| The Netherlands | 1,506 | 2.4 | 21 | 1.4 | 363 |
| Poland | 173 | -9.3 | 0 | 0.0 | 30 |
| Other markets | 19 | 21.5 | 2 | 10.5 | 5 |
| Eliminations | -161 | - | 0 | 0.0 | -1,313 |
| Core business | 5,502 | 0.0 | 177 | 3.2 | 1,680 |
| Several markets (MAG45) | 279 | -0.9 | 1 | 0.4 | 54 |
| Other markets | 9 | - | 0 | 0.0 | 1 |
| Related business | 288 | -0.7 | 1 | 0.3 | 55 |
| Solar Group | 5,790 | 0.0 | 178 | 3.1 | 1,735 |
| DKK million | Revenue | Adjusted organic growth | EBITA | EBITA margin | Non-current assets |
| --- | --- | --- | --- | --- | --- |
| H1 2019 | |||||
| Denmark | 1,736 | 4.6 | 86 | 5.0 | 2,116 |
| Sweden | 1,233 | 1.6 | 5 | 0.4 | 335 |
| Norway | 986 | 13.4 | 20 | 2.0 | 209 |
| The Netherlands | 1,480 | 5.8 | 35 | 2.4 | 313 |
| Poland | 182 | 0.8 | 0 | 0.0 | 35 |
| Other markets | 15 | 11.9 | 1 | 6.7 | 5 |
| Eliminations | -102 | - | 0 | 0.0 | -1,291 |
| Core business | 5,530 | 5.6 | 147 | 2.7 | 1,722 |
| Several markets (MAG45) | 284 | 7.1 | -6 | -2.1 | 69 |
| Other markets | 11 | - | -1 | -9.1 | 1 |
| Related business | 295 | 6.4 | -7 | -2.4 | 70 |
| Solar Group | 5,825 | 5.6 | 140 | 2.4 | 1,792 |
SOLAR Q2 2020
Notes
Discontinued operation
On 25 March 2019, Solar closed the process initiated in December 2018 of a management buyout of our Norwegian training business Scandinavian Technology Institute (STI), a part of our related business. The divestment constituted an accounting loss of DKK 17m, which was included in the financial statement for 2018.
The discontinued operation impacted the income statement as follows:
| DKK million | Q2 | H1 | Year | ||
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Revenue | - | - | - | 12 | 12 |
| Cost of sales | - | - | - | -1 | -1 |
| Gross profit | - | - | - | 11 | 11 |
| Costs | - | - | - | -13 | -13 |
| Earnings before interest and tax (EBIT) | - | - | - | -2 | -2 |
| Financials | - | - | - | 0 | 0 |
| Earnings before tax (EBT) | - | - | - | -2 | -2 |
| Tax on net profit or loss for the period | - | - | - | 0 | 0 |
| Net profit or loss for the period | - | - | - | -2 | -2 |
| Write-down to fair value less costs to sell | - | - | - | 0 | 0 |
| Net profit or loss for discontinued operations | - | - | - | -2 | -2 |
| Earnings from discontinued operations in DKK per share outstanding (EPS) | - | - | - | -0.27 | -0.27 |
| Diluted earnings from discontinued operations in DKK per share outstanding (EPS-D) | - | - | - | -0.27 | -0.27 |
SOLAR Q2 2020
Notes
Acquisition of business activities
On 15 May 2019, Solar A/S acquired selected parts of Onninen AB's Swedish business activities from the Finnish Kesko Corporation. Solar acquired the heating, plumbing and air conditioning business segment, which serves mostly small and medium-sized contractors in Sweden. The acquisition included 12 branches.
The acquisition was financed via withdrawals from the Solar Group's cash resources.
In 2019, we saw a full-year revenue of approx. DKK 300m. As the acquired activities are fully integrated into Solar Sverige, we estimated the 2019 EBITA impact to be approx. DKK -10m due to integration and restructuring costs.
Transaction costs related to the acquisition totalled DKK 2m.
Negative goodwill has been identified with DKK 18m and is attributable to assumed restructuring costs related to staff and rent. The amount is recognised in the income statement under other income minus the assumed restructuring costs, leading to a net profit of DKK 2m.
The key rationale behind the acquisition is to strengthen our market position within heating and plumbing, and climate and energy in Sweden.
Fair value at the date of the acquisition (DKK million)
| Property, plant and equipment | 1 |
|---|---|
| Inventories | 55 |
| Prepayments | 3 |
| Other payables | -6 |
| Other provisions | -6 |
| Net assets acquired | 47 |
| Negative goodwill | -18 |
| Final acquisition price | 29 |
| Cash paid at closing | 40 |
| Withheld purchase price | 4 |
| Acquisition price | 44 |
| Adjustment acquisition price¹ | -15 |
| Final acquisition price | 29 |
1) At closing, the actual inventory was lower than estimated which triggers a similar adjustment of the acquisition price. The amount is recognised under other receivables.
SOLAR Q2 2020
Notes
Accounting policies
The quarterly report for Solar A/S has been prepared in accordance with IAS 34 “Presentation of interim reports” as approved by the EU and additional Danish disclosure requirements for quarterly reports of listed companies.
Apart from the effect of new IAS/IFRS standards implemented during the period, the accounting policies remain unchanged from the Annual Report 2019, which contains a full description of these on pages 53-55 as well as of relevant, supplementary notes.
Key items in the accounts are based on annual contracts etc. A prudent assessment of the current year’s activities was undertaken during the preparation of this quarterly report.
In the quarterly report, income tax has been calculated on the basis of pre-tax profits at the expected average tax rate. No calculations of taxable income for the period have been made.
New accounting standards implemented during the period
No additional standards have been implemented in the period, only amendments and improvements to existing standards. These changes have no impact on Solar.
New accounting standards to be implemented in coming accounting periods
The following standards and amendments relevant for Solar have been issued but are not yet effective:
- Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current, effective 1 January 2022.
- Amendment to IAS 37, Provisions, contingent liabilities and contingent assets: Onerous contracts, Cost of fulfilling a contract, effective 1 January 2022.
- Annual improvements 2018-2020 comprising minor amendments to existing standards, effective 1 January 2022.
Solar has not yet assessed the potential impact of these amendments.
The following standards and amendments relevant for Solar have been issued and are effective but have not yet been EU endorsed:
- Amendment to IFRS 16 Leases: COVID 19-Related Rent Concessions, effective 1 June 2020.
Solar has assessed the potential impact of this amendment as insignificant.
On audit
This quarterly report has not been audited or reviewed.
SOLAR Q2 2020
Quarterly figures
Consolidated
| Income statement (DKK million) | Q1 | Q2 | Q3 | Q4 | ||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | 2018 | 2019 | 2018 | |
| Revenue | 3,045 | 2,957 | 2,745 | 2,868 | 2,777 | 2,539 | 3,077 | 3,009 |
| Earnings before interest, tax, depreciation and amortisation (EBITDA) | 142 | 121 | 127 | 104 | 152 | 106 | 161 | 121 |
| Earnings before interest, tax and amortisation (EBITA) | 97 | 80 | 81 | 60 | 105 | 93 | 115 | 109 |
| Earnings before interest and tax (EBIT) | 82 | 62 | 65 | 41 | 82 | 64 | 75 | 74 |
| Financials, net | -8 | -7 | -6 | -9 | -9 | -7 | -10 | -16 |
| Earnings before tax (EBT) | 45 | -7 | 153 | 56 | -2 | 70 | 73 | 54 |
| Net profit or loss for the quarter | 30 | -20 | 141 | 48 | -22 | 49 | 58 | 10 |
Balance sheet (DKK million)
| Non-current assets | 1,636 | 1,739 | 1,735 | 1,792 | 1,691 | 1,572 | 1,756 | 1,516 |
|---|---|---|---|---|---|---|---|---|
| Current assets | 3,349 | 3,425 | 3,267 | 3,451 | 3,460 | 3,121 | 3,234 | 3,117 |
| Balance sheet total | 4,985 | 5,164 | 5,002 | 5,243 | 5,151 | 4,693 | 4,990 | 4,633 |
| Equity | 1,441 | 1,515 | 1,614 | 1,552 | 1,512 | 1,645 | 1,592 | 1,638 |
| Non-current liabilities | 455 | 713 | 457 | 713 | 707 | 536 | 503 | 543 |
| Current liabilities | 3,089 | 2,936 | 2,931 | 2,978 | 2,932 | 2,512 | 2,895 | 2,452 |
| Interest-bearing liabilities, net | 1,077 | 1,032 | 845 | 1,182 | 1,089 | 712 | 921 | 461 |
| Invested capital | 2,332 | 2,302 | 2,178 | 2,461 | 2,395 | 2,055 | 2,297 | 1,797 |
| Net working capital, end of period | 1,432 | 1,331 | 1,383 | 1,466 | 1,467 | 1,312 | 1,280 | 1,090 |
| Net working capital, average | 1,411 | 1,230 | 1,391 | 1,299 | 1,339 | 1,184 | 1,386 | 1,182 |
SOLAR Q2 2020
Quarterly figures
Consolidated – continued
| Cash flows (DKK million) | Q1 | Q2 | Q3 | Q4 | ||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | 2018 | 2019 | 2018 | |
| Cash flow from operating activities | -43 | -132 | 282 | -17 | 144 | -23 | 305 | 327 |
| Cash flow from investing activities | -25 | -28 | -18 | -78 | -40 | -30 | -48 | -68 |
| Cash flow from financing activities | 84 | 160 | -198 | 82 | -88 | 35 | -264 | -199 |
| Net investments in intangible assets | -12 | -10 | -12 | -8 | -8 | -20 | -9 | -17 |
| Net investments in property, plant and equipment | -13 | -21 | -4 | -25 | -25 | -10 | -39 | -26 |
| Acquisition and disposal of subsidiaries, net | 0 | 5 | 0 | -40 | 0 | 0 | 0 | -10 |
Financial ratios (% unless otherwise stated)
| Revenue growth | 3.0 | 5.0 | -4.3 | 4.9 | 9.4 | -2.2 | 2.3 | 1.4 |
|---|---|---|---|---|---|---|---|---|
| Organic growth | 2.6 | 6.0 | -1.7 | 4.2 | 7.9 | -0.3 | 1.6 | 2.3 |
| Organic growth adjusted for number of working days | 1.4 | 5.8 | -1.6 | 5.6 | 6.3 | -0.3 | 2.6 | 2.5 |
| Gross profit margin | 20.5 | 20.1 | 20.5 | 20.2 | 19.7 | 20.2 | 20.5 | 20.0 |
| EBITDA margin | 4.7 | 4.1 | 4.6 | 3.6 | 5.5 | 4.2 | 5.2 | 4.0 |
| EBITA margin | 3.2 | 2.7 | 3.0 | 2.1 | 3.8 | 3.7 | 3.7 | 3.6 |
| EBIT margin | 2.7 | 2.1 | 2.4 | 1.4 | 3.0 | 2.5 | 2.4 | 2.5 |
| Net working capital (NWC end of period)/revenue (LTM) | 12.2 | 11.8 | 11.9 | 12.9 | 12.6 | 11.8 | 11.0 | 9.8 |
| Net working capital (NWC average)/revenue (LTM) | 12.0 | 10.9 | 11.9 | 11.4 | 11.5 | 10.7 | 11.9 | 10.6 |
| Gearing (interest-bearing liabilities,net/EBITDA), no. of times | 1.9 | 2.5 | 1.5 | 2.6 | 2.2 | 2.0 | 1.7 | 1.2 |
| Return on equity (ROE) | 7.5 | 2.0 | 13.6 | 5.7 | 1.0 | -0.7 | 4.1 | 8.1 |
| Return on invested capital (ROIC) | 9.0 | 8.1 | 10.2 | 7.9 | 8.3 | 5.6 | 8.3 | 8.1 |
| Adjusted enterprise value/earnings before interest, tax and amortisation (EV/EBITA) | 6.3 | 8.5 | 6.0 | 8.9 | 8.1 | 10.7 | 7.9 | 6.8 |
| Equity ratio | 28.9 | 29.3 | 32.3 | 29.6 | 29.4 | 35.1 | 31.9 | 35.4 |
SOLAR Q2 2020
Quarterly figures
Consolidated – continued
| Q1 | Q2 | Q3 | Q4 | |||||
|---|---|---|---|---|---|---|---|---|
| Share ratios (DKK unless otherwise stated) | 2020 | 2019 | 2020 | 2019 | 2019 | 2018 | 2019 | 2018 |
| Earnings per share outstanding (EPS) | 4.11 | -2.74 | 19.32 | 6.82 | -3.18 | 6.71 | 7.95 | 1.37 |
| Intrinsic value per share outstanding | 197.44 | 207.58 | 221.15 | 224.52 | 218.73 | 225.40 | 218.13 | 224.44 |
| Share price | 204.50 | 286.68 | 255.05 | 312.60 | 289.41 | 401.55 | 297.31 | 284.12 |
| Share price/intrinsic value | 1.04 | 1.38 | 1.15 | 1.39 | 1.32 | 1.78 | 1.36 | 1.27 |
Employees
| Number of employees (FTE), end of period | 3,052 | 2,982 | 2,934 | 3,079 | 3,070 | 2,918 | 3,041 | 2,955 |
|---|---|---|---|---|---|---|---|---|
| Average number of employees (FTE), LTM | 3,057 | 2,951 | 3,024 | 2,984 | 3,018 | 2,929 | 3,039 | 2,941 |
Definitions
| Organic growth | Revenue growth adjusted for enterprises acquired and sold off and any exchange rate changes. No adjustments have been made for number of working days. |
|---|---|
| Net working capital | Inventories and trade receivables less trade payables. |
| ROIC | Return on invested capital calculated on the basis of operating profit or loss less tax calculated using the effective tax rate. |
In general, financial ratios are calculated in accordance with the Danish Finance Society's "Recommendations & Ratios 2019".
As at 1 January 2019, Solar implemented IFRS 16, Leases, by applying the modified retrospective approach. Comparative figures are not restated. This especially affects EBITDA, interest-bearing liabilities, EBITDA margin, gearing and equity ratio.
In general, restatements have been made of income statements, cash flow and key ratios for the discontinued operations in STI for 2018. In accordance with IFRS, the balance sheet has not been restated.
SOLAR Q2 2020
Statement by the Executive Board and the Board of Directors
Today, the group's Board of Directors and Executive Board have discussed and approved the Q2 2020 quarterly report of Solar A/S.
Vejen, 12 August 2020
The quarterly report, which has not been audited or reviewed by the company's auditor, is presented in accordance with IAS 34 "Interim Financial Reporting" as approved by the EU and additional Danish disclosure requirements for quarterly reports of listed companies.
EXECUTIVE BOARD
In our opinion, the quarterly report gives a fair presentation of the group's assets, equity and liabilities, and financial position as at 30 June 2020 as well as of the results of the group's activities and cash flow for Q2 2020.
Jens E. Andersen
CEO
Hugo Dorph
CCO
Michael H. Jeppesen
CFO
Further, in our opinion, the management's review gives a true and fair statement of the development of the group's activities and financial situation, net profit or loss for the period and of the group's overall financial position and describes the most significant risks and uncertainties that the group faces.
BOARD OF DIRECTORS
Jens Borum
Chairman
Jesper Dalsgaard
Vice-chairman
Lars Lange Andersen
Peter Bang
Morten Chrone
Ulrik Damgaard
Bent H. Frisk
Louise Knauer
Jens Peter Toft
Solar A/S
Industrivej Vest 43
DK-6600 Vejen
Tel. +45 79 30 00 00
CVR no. 15908416
www.solar.eu
http://www.linkedin.com/company/solar-as
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