Olvi Group's Harf-Year Report, 1 January to 30 June 2020 (6 months)

OLVI PLC                             Half-Year Report 18.8.2020 at 9:00 am

OLVI GROUP’S HALF-YEAR REPORT, 1 JANUARY TO 30 JUNE 2020 (6 MONTHS)

Half-year report in brief

Olvi Group’s sales volume, net sales and operating profit improved during the review period. Thanks to a strong market position, sales volume and operating profit increased also in the second quarter despite the impacts of the corona pandemic. The financial standing and cash at hand remain at the previous year’s good level.

Reinstating the earnings guidance

The corona pandemic caused a sudden change in business operations, and on 30 April 2020 Olvi withdrew its earnings guidance for the current year. As the business situation has stabilised, Olvi reinstates the guidance presented in the financial statements bulletin of 27 February 2020, stating that operating profit for fiscal year 2020 is expected to remain on the previous year’s good level.

Consolidated key ratios

Business development

Lasse Aho, Managing Director:

Olvi Group’s business development in the first half of the year has been excellent in spite of the corona pandemic. Sales volume, net sales and operating profit improved in all of the main markets in Finland, the Baltic states and Belarus. We are particularly delighted to see how our strong market position has been reflected in the challenging second quarter as increased retail sales. Sales volume increased during the corona pandemic, thanks to strong retail sales and warm weather in the beginning of the season. Rapid response with cost saving measures and production optimisation at the first stages of the corona crisis enabled good performance development in spite of a temporary decline in average price.

Business in Finland developed strongly during the entire first half. Sales volume, net sales and operating profit have clearly increased on the previous year, also in the second quarter. The focus of consumer demand has shifted from cross-border and on-trade sales to retail sales. This has boosted sales in Finland and further strengthened Olvi’s market position. Towards the end of the review period, signs of consumption patterns returning to normal and an increase in average price could also be seen.

Development in the Estonian market has remained positive during the first half of the year measured by sales volume, net sales and operating profit alike. Operating profit turned to a positive trend in the second quarter, thanks to intense business adaptation measures, increased export sales and warm weather in June. The corona pandemic imposed restrictions on travel in particular, and this impacted the sales volume for on-board and harbour sales in Tallinn in particular. As corona restrictions are eased, however, recovery of sales volumes can be seen both in domestic demand as well as cross-border sales.

In Latvia, the market share has improved in all main product categories. However, the corona pandemic and declined cross-border sales had a negative effect on development over the entire period under review. Amendments to alcohol legislation enacted in the current and previous year have also impacted consumer demand as well as profitability. Latvia cancelled the corona pandemic-related emergency powers only in mid-June, and after that, the restaurant business in the country has started to recover gradually.

In Lithuania, business development has been strong for the entire first half of the year and continued also in the second quarter. Demand for Volfas Engelman branded products has been good both domestically and abroad. Exports have increased strongly also in the second quarter. Domestic consumer demand in Lithuania has remained on a better level during the crisis compared to the other Baltic states. However, corona restrictions had an impact particularly on domestic on-trade sales.

In Belarus, the impact of the corona pandemic became apparent later than in Olvi’s other market areas, and sales volume declined in the second quarter due to a change in consumption patterns caused by the coronavirus. The weather was also very warm in the beginning of the respective season last year. However, aggregate sales volume for the first half of the year has increased by 1.3 percent. The decline in net sales and operating profit was substantially affected by the weakened exchange rate. Measured in the local currency, the company’s net sales increased by 4 percent and operating profit improved by 9 percent.

The Group’s strategic growth investments have proceeded according to plan. The commissioning of a new production line and juicing facility has continued in Finland, and construction of a new production line started in Belarus. 

Seasonal nature of the operations

The Group’s business operations are characterised by seasonal variation. The net sales and operating profit from the reported geographical segments do not accumulate evenly but vary according to the time of the year and the characteristics of each season.

Sales development

Olvi Group’s sales volume in January-June increased by 4.9 percent to 382.9 (365.0) million litres. The sales volume in April-June increased by 0.9 percent to 229.7 (227.6) million litres.

In the first half of the year, sales volume has increased in all other operating countries except Latvia. Even though the corona pandemic had a substantial impact on consumer demand in the second quarter, the Group’s sales volume increased by almost one percent. The growth in sales volume was particularly attributable to good performance in Finnish retail sales. Strong growth continued also in Lithuania.

The Group’s net sales in January-June increased by 2.0 percent and amounted to 205.6 (201.5) million euro. The slight decline in net sales in the second quarter was substantially attributable to lower average price due to sales channel restrictions and changes in consumer demand.

Earnings development

The Group’s operating profit in January-June stood at 28.0 (25.8) million euro, or 13.6 (12.8) percent of net sales. Operating profit in April-June stood at 20.2 (19.8) million euro, which was 16.7 (15.9) percent of net sales. Operating profit has improved by 8.6 percent from the beginning of the year, and even in the second quarter there was an improvement of 2.0 percent. Profitability has improved through a reduction in other operating expenses, attributable to rapid business adaptation measures.     

The Group’s January-June profit after taxes amounted to 19.9 (18.3) million euro. Profit for April to June stood at 14.5 (13.2) million euro.

Earnings per share calculated from the profit belonging to parent company shareholders in January-June was 0.95 (0.87) euro, and the April-June figure was 0.69 (0.62) euro.

Balance sheet, financing and investments

Olvi Group’s balance sheet total at the end of June 2020 was 442.6 (410.5) million euro. Equity per share at the end of June 2020 stood at 12.20 (11.49) euro. The equity ratio was 57.8 (58.8) percent and the gearing ratio was -8.6 (-9.5) percent. The current ratio, which represents the Group’s liquidity, remained at the previous year’s healthy level at 1.1 (1.1). The most substantial factor affecting the change in consolidated working capital is the parent company’s partial discontinuation of receivables factoring at the beginning of the year.

The amount of interest-bearing liabilities amounted to 3.4 (3.1) million euro at the end of June. Current liabilities made up 0.8 (0.9) million euro of all interest-bearing liabilities.

Olvi Group’s investments in extensions and replacements from January to June amounted to 19.0 (18.1) million euro. The companies in Finland accounted for 9.7 million euro, the Baltic subsidiaries for 4.0 million euro and Lidskoe Pivo in Belarus for 5.3 million euro of the total. Olvi Group has invested in increasing and diversifying its production capacity, as well as the modernisation of production facilities.

Personnel

Olvi Group’s average number of personnel in January-June was 1,859 (1,836). The Group’s average number of personnel increased by 23 people or 1.3 percent.

Olvi Group’s average number of personnel by country:

Board of Directors and management

There have been no changes in Olvi plc’s Board of Directors or management during the review period.

Other events during the review period

Changes in corporate structure

There were no changes in Olvi’s holdings in subsidiaries in January-June 2020.

Share-based payments

At the beginning of 2019, Olvi plc initiated a share-based incentive plan for key personnel, the performance period of which is from 1 February 2019 to 31 January 2021. Detailed information on the incentive plan is provided in Table 5, Section 4 of the tables attached to this half-year report.

Business risks and their management

The corona pandemic still has an impact on business operations through risks and predictability. However, Olvi has drafted a variety of scenarios and made preparations for responding to changing situations also if the crisis is prolonged.

The availability of raw materials and labour has been good; however, prolongation of the corona pandemic or substantial numbers of personnel falling ill may impact the production process. Olvi has made preparations for production disruptions and drafted contingency plans concerning the availability of personnel and raw materials, among other things. Furthermore, the unstable political situation and substantial weakening of the currency exchange rate bring more uncertainty to Belarus.

A more detailed description of normal business-related risks is provided in the Board of Directors’ report and the notes to the financial statements, as well as in the Investors/Corporate Governance section of the company’s Web site.
 

Events after the review period

There have been no significant reportable events after the review period.
 

OLVI PLC
Board of Directors

Further information: Lasse Aho, Managing Director, Olvi plc, phone +358 290 00 1050 or +358 400 203 600

TABLES:
- Statement of comprehensive income, Table 1
- Balance sheet, Table 2
- Changes in shareholders’ equity, Table 3
- Cash flow statement, Table 4
- Notes to the half-year report, Table 5

DISTRIBUTION:
NASDAQ OMX Helsinki Ltd
Key media
www.olvi.fi

*) Income taxes calculated from the profit for the review period.

Other reserves include the share premium account, legal reserve and other reserves.

OLVI GROUP                                                                                         TABLE 5

NOTES TO THE HALF-YEAR REPORT

The half-year report has been prepared in accordance with IAS 34, applying the same accounting policies as for the financial statements of 31 December 2019.

The information in the half-year report is presented in thousands of euros (EUR 1,000). For the sake of presentation, individual figures and totals have been rounded to full thousands, which causes rounding differences in additions. The ratios are calculated from exact amounts in euros. The information disclosed in the half-year report is unaudited.

The registered share capital on 30 June 2020 totalled 20,759 thousand euro.

Olvi plc’s shares will receive a dividend of 1.00 euro per share for 2019 (0.90 euro per share for 2018), totalling 20.7 (18.6) million euro. The dividend will be paid in two instalments. The first instalment of 0,50 euro per share was paid on 8 May 2020. The second instalment of 0,50 euro per share will be paid on 8 September 2020. The Series K and Series A shares entitle to equal dividend. The Articles of Association include a redemption clause concerning Series K shares.                                            
 

4. SHARE-BASED PAYMENTS                                                                                  

The aim of Olvi plc’s share-based incentive plan is to combine the objectives of the shareholders and the key employees in order to increase the value of the company, to make the key employees committed to the company, and to offer them a competitive reward plan based on earning the company’s shares.

In 2019, Olvi plc initiated a new share-based incentive plan for key personnel, the performance period of which is from 1 February 2019 to 31 January 2021. The prerequisite for receiving reward is that a key employee purchases the company’s Series A shares up to the maximum number determined by the Board of Directors and that employment or service continues upon reward payment. Rewards will be paid partly in the company’s Series A shares and partly in cash in 2021. The cash proportion is intended to cover taxes and tax-related costs arising from the rewards to the key employees. The plan is directed to approximately 60 people.

In accordance with the share-based incentive plan, Olvi plc sold a total of 36,450 treasury shares to the target group members in 2019 for a price of 1,179,330.37 euro. From January to June 2020, costs associated with the plan were recognised for a total of 671.6 thousand euro. Olvi Group does not have any other share-based plans or option plans.

5. TREASURY SHARES      

Olvi plc holds a total of 11,549 of its own Series A shares. The total purchase price of treasury shares was 502,956.28 euro. Treasury shares held by the company itself are ineligible for voting. Series A shares held by Olvi plc as treasury shares represent 0.06 percent of all shares and 0.01 percent of the aggregate number of votes. The treasury shares represent 0.07 percent of all Series A shares and associated votes.

On 8 April 2020, the General Meeting of Shareholders of Olvi plc decided to revoke any unused authorisations to acquire treasury shares and authorise the Board of Directors of Olvi plc to decide on the acquisition of the company’s own shares using distributable funds. The authorisation is valid for one year starting from the General Meeting and covers a maximum of 500,000 Series A shares.

The Annual General Meeting also decided to revoke all existing unused authorisations for the transfer of own shares and authorise the Board of Directors to decide on the issue of a maximum of 1,000,000 new Series A shares and the transfer of a maximum of 500,000 Series A shares held as treasury shares.                   

During January-June 2020, Olvi has not received any flagging notices in accordance with Chapter 2, Section 10 of the Securities Markets Act.

12. CALCULATION OF FINANCIAL RATIOS

In the summary of financial indicators (page 1), the Group presents figures directly derived from the consolidated income statement: net sales, operating profit and profit for the period, the corresponding percentages in proportion to net sales, as well as the earnings per share ratio. (Earnings per share = Profit belonging to parent company shareholders / Average number of shares during the period, adjusted for share issues.)

In addition to the consolidated financial statements prepared in accordance with IFRS, Olvi Group presents Alternative Performance Measures that describe the financial development of its business and provide a commensurate overall view of the company’s profitability, financial position and liquidity.

The Group has applied the ESMA (European Securities and Markets Authority) new guidelines on Alternative Performance Measures that entered into force on 3 July 2016 and defined APMs as described below.

As an APM supporting net sales, the Group presents sales volumes in millions of litres. Sales volume is an important indicator of the extent of operations generally used in the industry.

The definition of gross margin is operating profit plus depreciation and impairment.

Equity per share = Shareholders’ equity held by parent company shareholders / Number of shares at end of period, adjusted for share issues.

Equity to total assets, % = 100 * (Shareholders’ equity held by parent company shareholders + non-controlling interests) / (Balance sheet total).

Gearing, % = 100 * (Interest-bearing debt – cash in hand and at bank) / (Shareholders’ equity held by parent company shareholders + non-controlling interests).