Boreo Plc, INTERIM REPORT JAN. 1 TO MAR. 31, 2023

Boreo Plc, INTERIM REPORT JAN. 1 TO MAR. 31, 2023

May 5, 2023, at 9:00 EET

Strong growth of earnings

January-March 2023

Net sales grew by 29% to EUR 41.0 million (2022: 31.7).
Operational EBIT increased by 81% to EUR 2.1 million (5.1% of net sales) (2022: 1.2).
EBIT grew clearly by 149% to EUR 1.4 million (2022: 0.6).
Net cash flow from operating activities was EUR 0.8 million (2022: 1.5 including operations discontinued in 2022).
The profit for the period under review totaled EUR 0.5 million (2022: EUR 0.3 million).
Operational EPS was EUR 0.28 (2022: 0.23).
EPS was EUR 0.07 (2022: 0.05).
Net debt relative to operational EBIT of the previous 12 months was 2.4 (2022: 2.1 and 2.2 at the end of 2022)
Return on capital employed was 11.3% (2022: 11.3% and 10.4% at the end of 2022)
In January 2023, Boreo announced that it had agreed with SANY Europe GmbH to terminate the excavator dealership agreements in the Finnish and the Swedish markets following SANY’s plans to reorganize its operations in the Nordic region and the updated strategy and related strategic financial targets of Boreo published in September 2022.

Financial guidance and business model

Boreo's business model is to own, acquire and develop operations in Northern Europe. Boreo focuses on value creation in the long term and its aim is to be the best home for its companies and personnel. The main focus areas of the strategy are: Acquisitions, Development and People & Culture.

Boreo’s future focus is on earnings growth with attractive return on capital. The company's long-term strategic financial targets are:

Minimum 15% average annual operational EBIT growth
Minimum 15% Return on Capital Employed (ROCE)
Net debt to operational EBITDA between 2 and 3 (including acquired businesses as if they had been held for 12 months at the reporting date)

Boreo’s dividend policy is to pay an annually increasing dividend per share, considering capital allocation priorities.

The above-mentioned strategic financial objectives still serve as the company's financial guidelines. In line with its guidance policy, the company does not give separate short-term financial guidance.

In August 2022, Boreo sold its full 90% holding in the electronics component distribution business in Russia. For 2023, all figures in this interim report relate to continuing operations, unless otherwise stated. In the income statement, the comparison periods have also been adjusted for continuing operations, while the data in the cash flow statement have not been adjusted in the comparison period and include discontinued operations. The December 31, 2022, balance sheet no longer includes discontinued operations. Other than that, the accounting principles of this review do not include any changes that affect comparability. The comparison figures in brackets refer to the corresponding period of the previous year, unless otherwise specified.

Group’s key figures

Key figures
EUR million	Q1 2023	Q1 2022	Change	2022
Net sales	41.0	31.7	29%	160.4
Operational EBIT	2.1	1.2	81%	8.7
relative to the net sales %	5.1%	3.6%	-	5.4%
EBIT	1.4	0.6	149%	6.5
Profit before taxes	0.7	0.4	89%	5.5
Profit for the period, continuing operations	0.5	0.3	77%	4.4
Profit for the period, discontinued operations	0.0	0.7	-103%	-4.7
Operational net cash flow	0.8	1.5***	-50%	4.1***
Cash conversion, %	35%	84%***	-	51%***

Equity ratio, %	36.1%	35.9%	-	35.4%
Interest-bearing net debt	36.0	27.1	33%	30.9
Interest-bearing net debt relative to operational EBITDA of the previous 12 months*	2.4	2.1	-	2.2
Return on Capital Employed (ROCE %), R12	11.3%	11.3%	-	10.4%
Return on Trade Working Capital (ROTWC %), R12	28.4%	28.9%	-	26.7%
Return on equity (ROE %), R12	12.3%	13.7%	-	12.1%

Personnel at end of the period	329	287	15%	327

Operational EPS, EUR**	0.28	0.23	23%	1.82
EPS, EUR**	0.07	0.05	40%	1.12
EPS, EUR, discontinued operations	0.00	0.25	-100%	-1.56
Operational net cash flow per share, EUR	0.28	0.57	-51%	0.82

* Calculated in accordance with the calculation principles established with financiers. The formula for calculating the indicator is presented later in this report.**The effect of the interest rate of the hybrid bond recorded in equity adjusted by the tax effect is considered in the calculation of the EPS starting from Q1 2022. In Q1 2023, this net effect was EUR 0.12 per share and in Q1 2022 EUR 0.07 per share.*** Cash flow for comparison periods includes discontinued operations. The formula for calculating the indicator is presented later in this report.

Q1/2023 - CEO Kari Nerg:

Strong earnings growth contributed to improved capital efficiency

The first quarter of 2023 demonstrated a successful start for the year. Operational EBIT grew by 81% and was at EUR 2.1 million (5.1% of net sales). Acquisitions contributed to earnings growth by 58% and organic growth by 42%.

The uplift of ROCE from 2022 year end to 11.3% is the result of increased focus on capital efficiency and the process of rooting the ‘earnings growth and return on capital’ -mindset in the firm. Return on Trade Working Capital (ROTWC) used in the steering of the Group’s businesses was at 28 %.

Cash conversion in the first quarter was at 35% (vs. rolling 12 month cash conversion of 44%) impacted by the slight accumulation of working capital in businesses preparing for the summer season. In Q223, cash flow will be impacted positively with divestment of inventories attached to the exited SANY business in Finland and Sweden.

All business areas had a steady start to the year, SANY exit a significant milestone for Heavy Machines

Performance in the first quarter was supported by the positive development of the Technical Trade business area which recorded an 8.8% operational EBIT, 51% up from previous year. Electronics business area continued to generate stable earnings and cash flow although Signal Solutions Nordic faced delivery delays to coming quarters.

The most significant event in Q1 for our Heavy Machines business area was the announced exit from the SANY excavator business in Finland and Sweden. The decision follows our resource and capital allocation approach and we expect to achieve better returns for the resources tied to the business elsewhere.

Filterit and Lamox joined the Group as new companies

During the quarter, we continued to execute acquisitions based on proprietary sourcing efforts and welcomed Filterit and Lamox to the family. Through the financial profile of both of the acquired companies, we continue to move towards our overall target of creating a firm with high profitability and returns on capital. In addition, the acquisitions contribute to our objective of increasing the share of predictable and stable cash flows in the portfolio.

Continued focus on developing the value creation playbook

During 2022 we made significant process in crystallizing the key pillars of our value creation playbook. I am extremely pleased of the fact that after the introduction of our new strategic targets and strategy revisions made in Q322, we have gradually moved towards successfully starting to root the earnings and return on capital approach both in developing of our existing companies as well as to acquisitions. In addition, I expect the increased focus on sustainability to open avenues for business development in the long run.

With the support of a stable financial position (leverage at 2.4x) we continue to focus resources on creating attractive acquisition and re-investment opportunities and allocating capital in the best interest of our shareholders.

Briefing for investors, analysts and media

A webcast where CEO Kari Nerg and CFO Aku Rumpunen present the Q1 2023 interim report will be held today, May 5, 2023, at 11:00 am EET. The presentation is in English and questions can be asked after the presentation. The presentation material is available before the webcast on Boreo's website: www.boreo.com/investors.

You can watch the webcast at: https://boreo.videosync.fi/2023-q1-results.

The event will be recorded and the recording will be available after the event at: www.boreo.com/investors.

Vantaa, May 5, 2023

BOREO PLC

Board of Directors

Additional information:

Kari Nerg CEO tel +358 44 341 8514

Aku Rumpunen CFO tel +358 40 556 3546

Distribution: NASDAQ Helsinki Ltd Financial Supervisory Authority Principal media

www.boreo.com

Boreo in brief:

Boreo is a company listed on Nasdaq Helsinki that creates value by owning, acquiring and developing small and medium sized companies in Northern Europe. Boreo's business operations are organized into three business areas: Electronics, Technical Trade and Heavy Machines.

Boreo’s main objective is to create shareholder value in the long-term. It aims to achieve this with an acquisition-driven strategy, creating optimal conditions for its businesses to increase sales and improve profitability, and by being a best-in-class home for its companies and personnel.

The Group's net sales in 2022 were EUR 160 million and it employs over 300 people in seven countries. The company’s headquarter is in Vantaa.

Attachment