Okay, hello everyone and welcome to Harvia's first quarter results and performance review. My name is Tapio Pajuharju and I will go through the details, and then Ari Vesterinen is on my right-hand side and I will go through the financials. We'll get going. Very happy to share the news. We had a very strong and solid quarter, both on the top line and on the bottom line, and I'm very happy that the Harvia team and our key customers have been doing an excellent job on the marketplace. We'll dive into the numbers for the January-March. We'll also have a bit of a recap on our strategy and the steps forward, and then Ari will dive deeper on the financials, and at the end we have time for questions and comments if time allows and you have those available.
I think all in all, very strong revenue growth, and I think also in the organic area we were able to pass our benchmark of 5%. Very happy on that one. I think having said that, we had the Almost Heaven Saunas impact on the top line, as well as the rest of North America had a good job on the heater and component sales, and I will share that later on. On top of this, we had very minor, but it was a bit of a tailwind also on the currencies, especially on the U.S. dollar in that respect.
On the bottom line, we were able to close the EUR 4 million benchmark, and I think it's good to remember that usually and traditionally the first quarter for Harvia sauna and spa business in general is a strong quarter, and we were fighting against our all-time high quarter last year. Hence, this is a good number for the company. I think we were just not with a big margin, but slightly exceed our 20% benchmark on the bottom line. Earnings per share were growing nicely, operating free cash flow slightly down, and I think Ari will share the impact on that one, but it's mainly for the U.S. acquisition-related things and as well as for the pre-sales for the seasonal products for the domestic marketplace where we give a bit of longer payment terms that's impacting.
On the net debt, I think the IFRS 16 has an impact. When you would eliminate that and compare apples to apples, we were able to reduce our net debt by EUR 1.1 million in that respect. Maybe just on the top line, I think no magic. We've been following our plan and we've been executing and increasing our average price points and the new introductions of the Glow Corner, Cilindro Plus, the Wall Combi, as well as the new premium and professional market heaters on the Sentio by Harvia were able to increase the top line nicely, and they were also very nicely received on the marketplaces where we've been launching. I think it's good to remember that the Sentio by Harvia at this stage has only been launched to very selected markets as we speak.
On the wood-burning heaters, I think in multiple fronts we had a good season in Finland, Scandinavia, and Russia. One part of the success, especially for the last month of the quarter, was the upgraded Harvia Pro 20, where we did a bit of a facelift and also improved some of the performances of the components of the heater. I think later on you will hear that we launched a bit of a Russian-dedicated product launches on the Russian marketplace. Geographical expansion, I think the U.S. is an evident one, but I think very happy to see that on top of the Almost Heaven's own sauna sales, we had a very solid and good heater and component sales in North America, so including USA and Canada in that respect.
I think it's not very visible as of yet, but we have first inroads on the Scandinavian marketplace where we've been able to increase our presence on the Swedish marketplace, good inroads on the Norwegian marketplace, and more to come on that area. On the continuous improvement on the productivity, mainly on our operations, but as well as on the logistics, we've been doing a good job, and I think on the improvement of the efficiency. We didn't do any major things, but we invested into our China factory in Guangzhou, and we acquired a CNC Combi laser punching machine, which is now installed and up and running over there. Maybe a bit about the Almost Heaven Saunas , and you may remember that when we acquired the company, the company was doing good top line sales, but it was not profitable. It was slightly on red numbers.
We've been doing a bit of an overhaul of the portfolio, so we redesigned some of the products. We've been negotiating on the prices, and we've been able to adjust our prices, as well as we've been doing more professional sourcing on the key components for the saunas. In that respect, I think we've been doing a good job together with the U.S. team. As we speak, we've also been strengthening the operations team, and we have a seasoned professional individual joining the team. His name is George Chesebro, and he's our VP of Operations in the U.S. He's coming from the wood industry, so he has the insights on the sourcing of the wood and also manufacturing of the wood componentry and products.
I think all of our American customers have been having a good steady ride on the marketplace, and our Canadian partners have also been advancing on the marketplace very favorably. I think this is maybe not in quarter one, but quite soon after that. In order to be more capable of operating on the location and improving our productivity at the factory as well as on the warehousing, we acquired the West Virginia Renick Real Estate at the mid of April, and we paid $ 0.7 million for that. On the geographical split, I think Finland had a very strong ride, and I think most of the markets did a good solid job.
Having said that, Germany, I think already in the late 2018, we saw that something on the German market is not in excellent shape, and we tried to give a good remedy for that, but as you see on the numbers, we were not fully successful on the German marketplace fighting for the market. Now we have a better grip, and I think that's visible both on the heater sales, but it's also visible on the control unit sales, and I think that you will find out on the numbers. Product groups, I think we had a very solid, maybe even excellent growth in some of the categories.
The only one where we're a bit suffering is the control units, but I think what we have in the pipeline, we have very good new advanced technologies coming on board, and we also have something on the entry-level control units for the Central European marketplace, so we'll tackle that in the course of the year. I think the sauna rooms are now gaining speed a bit, and I think that's mainly due to the U.S. acquisition of the Almost Heaven Saunas , and I think last year, especially for the summertime, we had a bit of hiccups on the raw material inflation and a couple of other components for the saunas. I think that's a lesson we have now learned that we don't foresee that type of issues coming into our agenda. This gives you the market split, and I think we've been gaining share.
We've been gaining share clearly more than the market has been growing. The only part where we have not been highly successful is Germany, and that's where we are working on the remedy for the German marketplace. Russia has always been an interesting marketplace and can be ups and downs. Now we've been seeing a very steady growth on the electric heaters as well as on the wood-burning heaters. The wood-burning heaters have been a bit of a battle for Harvia, and we've been now adjusting some of our best-selling products for the Russian marketplace, and I think the first insights of the success are now becoming visible in that area.
On the componentry sauna heaters, 14%, I think that's addressable because we've been having good launches and good demand on the electric heaters and the componentry of that, but on top of that, good sales into the season for the wood-burning heaters in Finland, Scandinavia, and on the Russian marketplace. Sauna rooms, mainly thanks to Almost Heaven Saunas, control panels, most of the markets doing good, but the German has an impact on the control panels. Steam generators may be not exactly where we would like it to be, but I think getting closer to that, and now we are gaining speed with our new entry-level steam generators and working on the professional part in that respect.
I think this is just illustrating how our quarters traditionally have been, and the first quarter is the opening of the season, and then the last quarter, especially for Scandinavia, Central Europe, and partially also for North America, is becoming strong. The second and third are a bit in between, and the first quarter of last year was Harvia's all-time best quarter, both on the top line and on the bottom line, and we were able to beat that. I think it was a job well done. The currency rates gave us a bit of a tailwind, but not a lot, in the magnitude of EUR 100,000 on the bottom line.
I think just that where we are working on the strategy is to become a one-stop shop also for the consumers as well as the professionals in the sauna and spa industry, and to operate in all three types of saunas: the Scandinavian sauna, steam sauna, and the infrared sauna market. I think our offering for the consumer and residential market is strong and solid. Our offering for the professional market is getting stronger in the Scandinavian sauna and the infrared sauna. Having said that, we are not strong as of yet on the professionals' team, and that's where we are working to gain speed. No magic going forward. We'll continue implementing our chosen path on the strategy, increasing the average purchase value, both on the professional market as well as on the residential market. Geographical expansion, I think we'll focus on Central Europe.
Scandinavia will continue in the U.S. marketplace, and then we are working on its emerging paths on the Asian markets. I will take it step by step and small steps at the go. Productivity, now we've been working on the China facility, improving that a bit. I think going forward, we'll invest a bit more on the Muurame facility for the capabilities of that. The Almost Heaven Saunas' West Virginia factory is still fairly elementary in our scale and will work on advancing on that area. The Romanian sauna factory, we have some small add-on investments needed, but we'll stay on the investment budget as we've been giving guidance on the earlier sessions.
A bit on the one-stop shop, I think you've been seeing the professional heaters from the Sentio by Harvia, and traditionally Harvia's offering used to be ending at the max 18 kWh, and the larger saunas and the public saunas are demanding up to 36 and even higher, so now we are ready for the 36. We'll get also ready for the 24 and 18 on the professional marketplace. On the residential market, we had the Wall and good success on launching the Wall as such. On the basic heaters, now we've been having available the Combi heater on that area, and we'll work on that.
On the space efficiency area, the Glow Corner is for the very presentable, nice-looking heater for the smaller saunas, and then the Cilindro, which is the best-selling pillar heater on the market, we've been upgrading to a Cilindro Plus , and some of you may remember who were participating on our AGM that we will have a Cilindro Plus with the spot, which is in a way the most advanced, simple way of remote controlling your sauna going forward. This is the Pro 20, which we did the facelift, a bit of other improvements of the componentry, and received quite well on the domestic marketplace as well as on the Swedish.
Russia, we continue with the existing offering we have, but then we made a special edition of our wood-burning larger big-capacity heaters, and we did a co-design with Ville Haapasalo, and Ville Haapasalo is a rather popular character on the Russian marketplace, and now we've been selling this to our selective accounts in the Russian marketplace. I think that's all from the business part of the presentation, and Ari will continue on the financials and the numbers, and I will come back when it's time for questions and comments. Thank you.
Yeah, hello. Ari Vesterinen, my name, CFO of the group. Here are the main financials what we usually present, and okay, you have already seen the positive development of the sales, but what is especially delighting us is the adjusted operating profit, which has increased compared to the Q1 last year by 23%.
In fact, we are now, on the traditional Harvia level, where we've been also in the past. This Q1 is usually the best level of sales and profitability in our seasonality, and we can see it very nicely right now. One technical comment about the earnings per share, it looks like that they have been going down, but that's actually really not the fact. The fact is that we had the very big share emission through IPO end of Q1 last year, and we got a lot of new shares then, and this is divided by the average. In fact, with the same level of shares, with the same amount of shares, their earnings per share last year were EUR 0.09 per share and now EUR 0.14. We have had an increase of the net result per share of over 50% during Q1.
Free cash flow is really much related to the net working capital. Our net working capital has been growing now. It happens always from the year end, but now more than a year ago since we have had a new warehouse in the U.S., and we have invested there more in the service level of that company. Also, as Tapio told, the sales in Europe, especially the domestic sales, have developed very positively, and it increases the sales receivables, but only for short term. This is also a seasonal effect what we have in our company. As you remember, our profitability in terms of capital return is in a very good level, and also the equity ratio. We have reduced a little our staff in some production units abroad, but this is also more the seasonal effect.
Okay, the net debt has been affected slightly by IFRS 16. It increased, in theory, on our balance sheet, our interest-bearing calculatory debt by EUR 3 million end of last year. At the end of quarter one, it was EUR 2.9 million, and it is not in the comparison figures last year, that EUR 2.9 million. That is a change in the standards. As you remember, we had a very successful IPO of bringing some and much new equity in the company, and we restructured our financing last year. Now the financing costs by quarters are substantially lower than a year ago. Our investments at the end of Q1, there were about EUR 500,000, and last year, EUR 600,000. Our typical investment level is somewhere between EUR 1.5 million-EUR 2 million annually, and last year it was EUR 1.6 million. These are the investments in the intangibles in the normal business.
This shows the distribution of our shareholders. First of all, what is delighting us a lot is that we have got over 1,500 new individual shareholders compared to IPO. Especially households, Finnish households, have increased interest for Harvia, for this traditional sauna and sauna heater company. At the same time, the share of the international investors in nominee registers outside Finland has increased quite much. We had over 30% a year ago, and now we are over 51%. The share of our biggest shareholder, CapMan Funds, decreased during Q1 from 25% roughly to 12%. These have been the biggest changes in the shareholder structure. Harvia is a company with high dividend payout.
The annual general meeting, shareholders decided to pay out EUR 0.18 per share in April, and that happened already in the middle of April, and also authorized the board to decide another EUR 0.19 during the next fall. It has been also published that this decision will take place roughly on October 17th or something like that. We pay two times a year growing dividends, which are at least 60% of the net results. The financial targets, they are the same. They are long-term financial targets that we are targeting the growth rate of over 5% annually, and the EBIT level is over 20%. Now we reach it during Q1, and we have certain limits of the leverage ratio. We do not publish short-term guidance for Harvia. This is the financial part in brief. If you have any questions to Tapio or me, we are available.
Please.
Hi, it's Petri Kajaani from Inderes. I remember you said during the Q4 conference call that some of the Christmas and New Year's Eve pushed some of your sales to Q1. Can you give some color how much of this extra is in these good Q1 figures?
A bit on the Eastern European markets, as you can see on the Central Europe, not as much as we would have wished. I think for the other markets, I think it was minor, but some favorable swing, but not too big.
It seems to me that you really fast reached a good profitability level after the Almost Heaven Saunas acquisition. How long does it take to actually reach your 20% guidance for the full year? Because I think last time you said it's going to take us a long time.
It's not happening in a year, but now you're going into a really good direction. Can you give us some color? Is it happening faster than you earlier thought, or?
I think in general we can not give an exact guidance how fast we will get there. I think on the first quarter, the base business without the Almost Heaven Saunas was performing extremely well. I think it was a good product mix. It was a good volume. On top of that, I think on the Almost Heaven Saunas, we were maybe slightly faster than we expected to get it on black figures. It's not even close to the target figures where we would like to be with the Almost Heaven Saunas as we speak.
Okay.
Last question on the new models that you have introduced, and they're only in selective markets now, and I think they are these premium models with better margins. When are they coming with full speed?
I think that's good to remember. The sauna and spa business is conservative, if not extremely conservative business. To get them on our partners' showroom may take anything from six months to one full year. When they are then convincing their customers, will take an extra six months to a full year. It is a slow process, but it is a steady process.
Thanks.
Yes, Ari from Danska. A couple of questions on the volume strength that we saw. Germany was weak, but how about the rest of the business? The heater sales really going nicely. Could you describe if there was any difference within the quarter?
Did it start very strongly, or did it end strongly? What's the kind of visibility towards the summer and the Q2?
I think on the seasonal markets, which are mainly on the wood-burning heaters, we had a strong and solid start. It started maybe a week or two earlier than in general, but then it lasted long. Going forward, there seems to be a good solid trend, but it's nothing spectacular, just a normal business going forward. On the other parts than the wood-burning market, maybe some favorable demand trends on Eastern Europe, but that's about it.
Okay. Did you mention that you have a bit better grip on the German market, or how do you see the German situation?
I think we know what is causing some of the softness. Some of the softness is based on the economy.
I think the German economy is, at least based on our perception, not equally strong as we used to see it. On the marketplace, we have a couple of customers who have not been able to display the full portfolio, and we will try to find a way how to make it available and visible for our customers. I think on the entry-level control units, we are missing some of the fighting ammunition, but later in the year, we will have something on that area as well.
Okay. On the financial side, is it so that the IFRS 16 impact on the depreciation is about EUR 150,000? Is it about the same level going forward?
Yes. Yes. Basically, the IFRS 16 improves our EBITDA level with EUR 600,000 and increases the depreciation and interest level by the same sum. It is almost a neutral effect on EBIT level.
Okay. Thanks.
It is Petri from Inderes. Last time, I think you said something about making contracts with some pool companies in Europe. When are we going to see some impact on the sales from those?
I think they are becoming visible, but they are also gradual. These are large pool companies with a sales force of tens of people in each individual country. We are educating and training their salespeople, some learn faster, some learn slower. As we speak with both of the larger companies, we have an ongoing program. With one, we have a sole supplier base. With the other, we are one of the main suppliers.
Okay. Thanks.
In Central Europe and the U.S., the sauna heater business is typically winter business, fall and winter business.
That is the time when they are selling the most, the pool distribution chains, also the sauna products.
Now it is mainly training and gearing up for the new season starting in the fall. Any other questions or comments we could entertain from the online?
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From our side, that was all. Thank you for the attention, and thank you for good.