Strong development continued, outlook improved

Delete Group Oyj  Stock exchange release 11 November 2022 at 4.45 p.m. EET

                                                    DELETE GROUP OYJ

Interim Review January–September 2022 (IFRS, unaudited)

STRONG DEVELOPMENT CONTINUED, OUTLOOK IMPROVED

In June 2022, Delete announced that it had divested its Recycling Services. The segment is reported in this report in accordance with IFRS 5 “Assets Held for Sale and Discontinued Operations” and is not included in the Interim Review for Continuing operations. Unless otherwise stated, all of the quarterly, half-year and full-year figures that are presented in this report, including the corresponding 2021 periods, only include Continuing operations. In this Interim Review, Recycling Services is referred to as Discontinued operations and Cleaning Services as Continuing operations.

KEY POINTS: JULY–SEPTEMBER 2022

• Net sales decreased by 7% to EUR 27.0 (Q3 2021: 29.0) million. Organic growth was +12%, excluding divested W-Tech Entreprenad AB.
• EBITDA increased by EUR 3.2 million to EUR 6.7 (3.5) million
• EBIT increased by EUR 3.0 million to EUR 4.0 (1.0) million
• Operative cash flow increased by EUR 0.4 million to EUR 0.0 (-0.4) million
• Net debt decreased by EUR 36.9 million to EUR 35.5 (72.4) million

KEY POINTS: JANUARY–SEPTEMBER 2022

• Net sales decreased by 11% to EUR 72.5 (81.2) million. Organic growth was 0%, excluding divested W-Tech Entreprenad AB.
• EBITDA increased by EUR 6.2 million to EUR 9.9 (3.7) million
• EBIT increased by EUR 6.4 million to EUR 2.7 (-3.7) million
• Operative cash flow decreased by EUR 13.4 million to EUR -0.2 (13.2) million
• Group equity increased from year end 2021 by EUR 16.4 million to EUR 36.4 million
• Recycling Services was divested in June for net proceeds of EUR 36.2 million

KEY FIGURES

Information about the formulas and Alternative Performance Measures are presented in the notes section of these Interim Financial Statements. All figures presented are statutory unless stated otherwise.

OUTLOOK FOR 2022

Following a strong earnings and outlook development in 2022, Delete Group updated its outlook for 2022 on 9 November 2022:

The underlying demand for Cleaning Services business is expected to grow in 2022. Due to considerable productivity improvements achieved, successfully mitigated cost inflation factors and solid underlying organic growth, Delete Group’s adjusted EBITDA for January–December 2022 is estimated to be on EUR 14.0–15.0 million level (January-December 2021: EUR 7.8 million). Delete Group’s adjusted operating profit (EBIT) is expected to improve accordingly.

Previously valid outlook for 2022, published on 29 June 2022:

The underlying demand for Cleaning Services business is expected to grow in 2022. Delete Group’s efficiency and productivity are expected to improve compared to the previous year.

Delete Group’s operating profit excluding the Recycling Services business is expected to improve in 2022 compared to the operating profit excluding Recycling Services business in 2021.

Due to the coronavirus pandemic and the geopolitical developments, the outlook contains more uncertainty than usual and is based on the assumption that there are no material changes in the operating environment, postponements of scheduled work, or cancellations due to the pandemic.

SIRPA OJALA, CEO OF DELETE GROUP:

“Our third quarter performance was strong, continuing the favourable development we have seen during the year. We managed to meet the autumn’s high season demand well and we delivered our services with high quality and controlled field productivity. Our operating profit improved considerably, enabled by the good development of productivity and field controls.

The underlying Cleaning Services business continued its strong development in the third quarter with further new customers gained in an active market. Excluding revenues of the divested W-Tech operations, our organic net sales grew considerably also in the third quarter following the favourable underlying trend earlier this year. The organic growth increased due to industrial cleaning services provided to new customers and expanded share of wallet with the old customers with a busy shutdown schedule.

The geopolitical development and energy crisis in Europe have had only a limited direct impact on our business, at least so far, as we have no direct exposure to sanctioned parties or conflict regions. We have been able to mitigate the increased fuel prices and general cost inflation to a high degree with improved productivity and pricing measures.

Recycling Services was successfully divested earlier this year, and we are now fully focusing our core business of Cleaning Services. Our target is to continue the good recent development, both in terms of organic growth and further improving profitability. Collaboration with our customers is the key to the further development of our efficient and high-quality operations. We are confident that the continuing positive customer feedback we have received on our high standard service level will position us well in our efforts to continue profitable growth.”

OPERATING ENVIRONMENT

Cleaning services

The coronavirus pandemic impacts have passed and the overall demand is on a good normal level. The underlying long-term core demand is relatively resilient and stable over macro economic cycles. Customers continue to demand capabilities to handle increasingly complex assignments with high-quality environmental, health and safety standards, which favours large professional players like Delete Group. The recent and ongoing fuel and general cost inflation increases uncertainty for the short and mid-term.

NET SALES

In the third quarter, Delete Group’s net sales for Cleaning Services were EUR 27.0 (30.0) million, representing a year-on-year decline of 10%, mainly due to missing revenues from the divested W-Tech operations at year end 2021. Organically, the net sales of the Group grew by 12%, driven by industrial cleaning services provided to new customers and expanded share of wallet with the old customers with a busy shutdown schedule.

In January–September, the Group’s net sales were EUR 72.5 (81.2) million, declining 11% year on year, representing a good positive development for the underlying business, considering the above-noted W-Tech effects.

NET SALES BY SEGMENT

FINANCIAL PERFORMANCE

The Group’s adjusted operating profit (EBIT) during the third quarter of 2022 improved by EUR 2.4 million from the previous year to EUR 4.1 (1.7) million. The main drivers for the considerable improvement were strong productivity and the divestment of low-performing W-Tech operations in the comparison period.

Cost inflation, most notably for fuel, was mitigated by pricing and productivity improvements and did not have a material effect on the Group’s financial performance in the third quarter.

For January–September, Cleaning Services’ EBITDA improved by 63% from EUR 9.2 million to EUR 15.0 million, supported by the second and third quarter improvements. Field controls and productivity have improved, and the cost base efficiency programme completed at year end 2021 had a meaningful favourable effect, as did the divestment of loss-making W-Tech operations.

Administration without non-recurring costs was on a similar level as in the previous year, with most of the 2021 efficiency programme effects visible in the third quarter result. For January–September, the Administration unit’s EBIT improved by 8%.

EBITDA BY SEGMENT

EBIT BY SEGMENT

In July–September, net financial expenses amounted to EUR -0.8 (-1.8) million, consisting mainly of interest expenses, unrealised translation exchange rate losses and income on settled interest hedge contract. In January–September, net financial expenses amounted to EUR -3.8 (19.9) million; 2021 was favourably affected by the EUR 24.8 million write-down of the nominal value of senior secured notes. Gross financial expenses were EUR -4.9 (-4.9) million.

In July–September, profit before taxes amounted to EUR 3.2 (-0.5) million and in January–September to EUR -1.1 (16.3) million. In January–September, net result for the financial period for Continuing operations amounted to EUR -0.9 (16.2) million. Profit before taxes and net result in 2021 were favourably affected by the senior secured notes write-down.

In January–September, net result for the financial period including Discontinued operations amounted to EUR 16.5 (15.5) million with the net sales proceeds from the divestment of Recycling Services affecting 2022 and the notes write-down 2021 favourably.

FINANCING AND FINANCIAL POSITION

In July–September, cash flow from operating activities was EUR -0.0 (-0.4) million, with increased net working capital offsetting the considerably improved profits. The balance of non-recourse factoring receivables at the end of the third quarter was EUR 13.3 (17.1) million.

Delete Group’s cash and cash equivalents at the end of September 2022 were EUR 6.5 (7.0) million. In July 2022, the Group made a partial redemption of the senior secured notes for the amount of EUR 35.4 million, including a premium for the notes, using the Recycling Services divestment net proceeds of EUR 36.2 million. At the end of the third quarter, the Group’s interest-bearing debt was EUR 42.0 (79.4) million, consisting mainly of secured notes with a nominal amount of EUR 24.6 million, a EUR 10.0 million drawn revolving credit (SSRCF) and lease liabilities of EUR 9.0 million. At the end of September 2022, the Group had fully drawn its EUR 10.0 million SSRCF facility, to be used for general corporate purposes, acquisitions, and capital expenditure.

At the end of the third quarter, the only covenant for the senior secured notes and the SSRCF was complied with. After allowed pro forma EBITDA adjustments of the efficiency programme related to the divestment of the Demolition Business (EUR 0.2 million) and the pro forma adjustment for the divested Recycling Services, the net debt leverage was 2.5x, well below the covenant threshold of 5.0x.

At the end of September 2022, the Group’s net debt amounted to EUR 35.5 (72.4) million. The balance sheet total at the end of September 2022 was EUR 102.7 (137.1) million, decreasing mainly because of the divestment of Recycling Services and the related partial redemption of the senior secured notes. Property, plant and equipment totalled EUR 12.8 (26.3) million, decreasing mainly due to the divested assets of Recycling Services. The equity ratio⁵⁾ at the end of September 2022 improved considerably to 35.5% (17.2%).

CAPITAL EXPENDITURE AND CORPORATE TRANSACTIONS

In July–September 2022, capital expenditure in intangible and tangible assets excluding acquisitions was EUR 0.5 (0.5) million and in January–September EUR 1.1 (1.0) million.

There were no acquisitions during January–September 2022. Net proceeds from the divested Recycling Services in June 2022 were 36.2 million and reported under Proceeds from sales of subsidiary in the cash flow report of the Notes section.

R&D EXPENDITURE

In January–September 2022, R&D-related expenditure was immaterial and related to minor development of processes and tools.

KEY EVENTS AFTER THE REPORTING PERIOD

No key events after the reporting.

SUMMARY OF SIGNIFICANT RISKS AND RISK MANAGEMENT

Delete Group conducts an extensive annual risk assessment analysis, as a result of which risk management capabilities are updated and reviewed and approved by the Board of Directors.

The Group’s key risks are divided into strategic, operational and financing risks.

Operational risks are mainly related to uncertainty and a lack of visibility and resourcing due to the coronavirus pandemic, geopolitical developments in Europe, project execution, and the integration of acquired businesses, both in terms of quality and financially. The Group's business operations also inherently involve risks, such as environmental, health and safety risks, as well as dependence on suppliers and clients. The internal control environment is under constant development to improve preventative measures.

Financing risks are mainly related to refinancing, credit and liquidity, all of which may be further affected by the noted uncertainties.

Other uncertainties are related to the market environment and inflation of costs, especially for energy and fuel, as well as the successful implementation of the Group’s transformation strategy, including risks related to the outcome of the operational improvement plan for increased profitability, uncertainty related to capturing synergies, and risks related to targeted bolt-on acquisitions, personnel, and recruitments.

The Group has not identified other relevant changes that can be expected to have a significant influence on the business, given the risks mentioned herein, at the end of the third quarter in 2022.

SHARES AND SHAREHOLDERS

At the end of September 2022, the number of registered shares in Delete Group Oyj was 1,085,859,500 P-shares and 308,964,900 C-shares. Each share carries one vote. The Group is owned by Ax DEL Oy (83% of the shares) and a group of key employees and other minority investors (17%). The Group does not hold any of its own shares.

ANNUAL GENERAL MEETING AND BOARD AUTHORISATIONS IN EFFECT

The Annual General Meeting of Delete Group Oyj Shareholders held on 28 April 2022 adopted the Financial Statements and discharged the members of the Board of Directors and the CEO from liability for the financial year 1 January–31 December 2021. The Annual General Meeting resolved that no dividend will be paid for the fiscal year 2021.

Martin Forss, Åsa Söderström Winberg, Ronnie Neva-aho and Christian Schmidt-Jacobsen were re-elected as members of Board of Directors. Convening after the Annual General Meeting, the Board of Directors elected Martin Forss as its chairman.

KPMG Oy Ab was elected to continue as the Auditor of the company, and Ari Eskelinen, Authorised Public Accountant, will act as the Principal Auditor.

The Chairman of the Board will be paid EUR 50,000 and the Board members EUR 22,000 as remuneration for 2022. The appointed members of the Audit Committee and the ESG and Contracts Committee will be paid EUR 4,000 as additional remuneration and the appointed members of the Remuneration Committee EUR 2,000. Axcel Management’s Christian Schmidt-Jacobsen will not be paid remuneration. It was resolved that the remuneration for the Auditor shall be paid according to the Auditor's invoice.

STATEMENT OF ACCOUNTING POLICIES FOR INTERIM FINANCIAL STATEMENTS

Delete Group Oyj complies with half-yearly reporting according to the Finnish Securities Markets Act and discloses interim reviews for the first three- and nine-month periods of the year, in which key information regarding the company’s financial situation and development will be presented. The financial information presented in this Interim Review is unaudited.

FINANCIAL CALENDAR 2022–2023

Delete Group Oyj will publish the Financial Statements bulletin for January–December 2022 on 28 February 2023, the interim review January–March 2023 on 24 May 2023, the half-year financial report January–June 2023 on 30 August 2023 and the interim review January–September 2023 on 15 November 2023.

ALTERNATIVE PERFORMANCE MEASURES USED IN FINANCIAL REPORTING

Delete Group Oyj has adopted the guidelines of the European Securities and Market Authority (ESMA) on Alternative Performance Measures. In addition to the IFRS-based key figures, the company will publish certain other generally used key figures that may, as a rule, be derived from the profit and loss statement and balance sheet. The calculation of these figures is presented below. According to the company’s view, these key figures supplement the profit and loss statement and balance sheet, providing a better picture of the company’s financial performance and position.

FORMULAS

¹⁾ EBITDA = operating profit + depreciation and amortisation costs

²⁾ Adjustment definition: adjustments are material items outside the ordinary course of business affecting comparability, such as acquisition-related expenses, restructuring-related expenses, and other material extraordinary costs.

³⁾ Net debt = interest bearing liabilities, lease liabilities and instalment credit liabilities – cash and cash equivalent assets

⁴⁾ Organic growth: net sales from acquired businesses are considered inorganic for 12 months after the acquisition, and not accounted for as contributing to organic growth for the said period.

⁵⁾ Equity ratio = equity / (assets – prepayments)

⁶⁾ Net working capital = other than cash and cash equivalent current assets – other than net debt-related current liabilities

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Amounts in thousands of euros

Continuing operations

CONDENSED NOTES

Accounting policies

This interim review is not an interim report as specified in the IAS 34 standard. Delete Group Oyj complies with half-yearly reporting according to the Finnish Securities Markets Act and discloses interim reviews for the first three- and nine-month periods of the year, in which key information regarding the company’s financial situation and development will be presented. The financial information presented in this interim review is unaudited. The accounting policies applied in this interim review are the same as those applied in the last annual financial statements.

The changes in IFRS standards have had no material effect on Delete Group’s financial reporting. The Group has not adopted new IFRS standards affecting reporting during 2022.

Assets held for sale and Discontinued operations

The Recycling Services business is reported in this Interim Review in accordance with IFRS 5 “Assets Held for Sale and Discontinued Operations” and is not included in the Interim Review for Continuing operations. The figures in the statement of income and the items related to it, including comparison figures, have been stated to show the Discontinued operations separately from Continuing operations.

On 29 June 2022, Delete Finland Oy, a group company of the Delete Group, sold all shares in Delete Ympäristöpalvelut Oy, a fully owned subsidiary operating in the Recycling Services business area, to Remeo Holding II Oy with net proceeds of EUR 36.2 million received by the Group. After the transaction, Delete Group no longer operates in the Recycling Services business. Any post-transaction costs related to Recycling Services are reported under IFRS 5 during 2022.

Operating profit (EBIT)

Operating profit (EBIT) consists of sales and other operating income less the costs of materials and services, costs of employee benefits and other operating expenses as well as depreciation, amortisation and impairment losses. Exchange rate differences resulting from working capital items are included in the operating profit.

KEY EVENTS AFTER THE REPORTING PERIOD

No key events after the reporting.

Delete Group Oyj

Board of Directors
 

FOR FURTHER INFORMATION

Ville Mannola, CFO of Delete Group Oyj

E-mail: ville.mannola@delete.fi

Tel. +358 400 357 767

Sirpa Ojala, CEO of Delete Group Oyj

E-mail: sirpa.ojala@delete.fi

www.delete.fi
 

DELETE GROUP IN BRIEF

Delete Group is one of the leading providers of environmental services in the Nordic countries. The Group provides customers with business-critical services that require special expertise and equipment in cleaning services.

The Group's head office is located in Vantaa and it employs approximately 600 professionals in 27 locations in Finland and Sweden.