Financial Statement Release 20 February 2019 at 3:00 p.m. (CET)
Savosolar Plc’s financial statement release for 2018: Revenue increased significantly, operating result still negative
Key figures in January-December 2018
Savosolar’s revenue increased year-on-year, amounting to EUR 5.6 million (2017: EUR 0.8 million).
Operating result (EBIT) amounted to EUR -5.4 million (EUR -4.9 million).
Net result for the year amounted to EUR -6.4 million (EUR -5.7 million).
Earnings per share were EUR -0.02 (EUR -0.07)
The value of the projects in the sales pipeline was EUR 125 million at the end of the reporting period, of which the value of the projects in the bidding and planning phase totalled approximately EUR 54 million.
Key figures in July-December 2018
Revenue for the second half of the year amounted to EUR 4.3 million (7-12/2017: EUR 0.2 million).
Operating result (EBIT) amounted to EUR -2.9 million (EUR -2.6 million).
CEO JARI VARJOTIE:
“In 2018, Savosolar’s revenue increased significantly compared to the previous year particularly thanks to the large project deliveries in Denmark and France. When comparing to 2017 there were only a few small project deliveries, while the large projects in Denmark were waiting for the government decisions for the subsidies, and the other markets were still waiting to take off. The contract signed with the Danish Grenaa Varmevark A.m.b.a in May 2018 is Savosolar’s largest delivery for a solar thermal system so far. The majority of work related to this project was accomplished during the review period, and the hand-over is scheduled to take place in March 2019. Further, the solar thermal system delivered for newHeat SAS in Condat-sur-Vézère, France in January 2019, is the largest solar thermal collector field in France, and at the same time, it is the world’s largest solar thermal field installed on a one-axis tracking system.
Operating result did not meet the expectations and remained negative. The main reasons behind the operating loss were the liabilities paid in 2018 relating to certain quality issues in solar collectors manufactured in the early stage of the company, and the higher than estimated project costs in our Danish projects. The quality issues with the early-stage collectors were due to some faults in manufacturing processes, and these have been fixed in the current processes.
Operating result was also affected by the fact that deliveries and project work were not split evenly during the year. The large projects in the second part of the year were not enough to compensate for the quiet first year-half. The investments made in sales and system design of customer projects can also be seen in the figures.
However, the significant customer contracts signed during 2018 show that the earlier production equipment investments and the strong focus on sales have taken us to the right direction.
The rights issue arranged in June-July 2018 to finance our growth succeeded well. However, the subscription of shares based on warrant program, which was planned to take place in December, did not unfortunately materialize. In order to deliver the on-going as well as possible new projects, to continue on the growth track and to execute the savings program in production costs, we decided to initiate a new rights issue after the end of financial year 2018.
Interest in and demand for the large solar thermal systems is growing in many places around the world. The number of our projects in the quotation and design phase has remained at a high level, and there are projects pending in many countries. One indication of the development of the whole industry is that project developers, who are ready to invest in clean heating, are entering the market.
Savosolar’s strengths are our advanced technology, strong references and competent partners. Together with our partners our goal is to find the best possible solutions for the customers. Our satisfied customers are one of the most important success criteria for us. An excellent example of this is the extension ordered by Jelling Vaermevark in its existing solar thermal field we delivered few years ago. This field also holds the Danish record of the highest daily solar thermal energy production. We also thrive to develop new kinds of solutions when we see they add value to customers. A great example of this is the solar thermal system delivered in France, in which the sun-tracking system helps collectors produce more energy from a limited land area. I believe there is demand for these kinds of solutions also elsewhere. Savosolar is known as an innovative player in the industry, and we plan to remain as such also in the future.”
SAVOSOLAR AS A COMPANY
Savosolar Plc is a Finnish public limited liability company that manufactures internationally award-winning solar thermal absorbers, collectors as well as energy production systems built on these. According to the knowledge of the company’s management the solar thermal collectors with MPE absorbers manufactured by Savosolar are the most efficient in the world.
Savosolar focuses primarily on large solar thermal collectors and industrial-size heating systems. The company’s vision is to be the global first-choice supplier of high-performance solar installations. Savosolar has delivered its products to almost 20 countries on four continents.
Savosolar’s domicile and production plant is located in Mikkeli, Finland. Savosolar also has office premises in Vantaa, Finland as well as fully-owned subsidiaries in Denmark and Germany, and sales cooperation partners in Australia and Mexico.
The accounting principles for the financial statement release
This financial statement release is unaudited. The report has been prepared in accordance with the Finnish Accounting Standards (FAS) using the same principles as in the 2017 financial statements. Savosolar applies the Percentage for Completion method in its projects. The percentage of completion method is an accounting method in which the revenues and expenses of long-term contracts are recognized as a percentage of the work completed during the period. The PoC -method is applied when the project’s contract price exceeds EUR 200,000. The PoC method requires that the final outcome of a project, project margin, can be estimated reliably throughout the project’s life cycle.
Unless otherwise stated, the comparison figures refer to the same period of previous year 2017.
BUSINESS DEVELOPMENT IN 2018
Revenue for the full-year 2018 amounted to EUR 5.6 million (1-12/2017: EUR 0.8 million). The main reasons for the increase in revenue are the company’s large delivery projects to Denmark and France during the second half of 2018. In 2017 the company had only a few small delivery projects due to the postponement of decisions on state support, which caused a stand-still of the market in Denmark, the Europe’s biggest market.
Revenue for the latter half of the year amounted to EUR 4.3 million (7-12/2017: EUR 0.2 million). Revenue came mainly from delivery projects to Denmark and France.
Savosolar and Danish Grenaa Varmevaerk A.m.b.a. signed a contract in May on delivery of the largest solar thermal system in Savosolar’s history so far. The value of the contract is approximately EUR 3.5 million. The project has proceeded in schedule, and hand-over will take place in March 2019.
Another significant contract was signed in March with newHeat SAS to deliver a solar thermal system to Condat-sur-Vézère France. The solar thermal plant is the largest in France and the value of the contract was over EUR 2.0 million. Additionally, Savosolar has been awarded the operation & maintenance contract. The delivery was started during the first half of the year and completed in January 2019.
In July Savosolar agreed with Jelling Varmevaerk in Denmark for an extension of the existing solar thermal collector field, delivered in 2016. The value of the agreement is approximately EUR 0.7 million.
In France Savosolar also delivered solar thermal system to Véolia ECHM, in the city of Voreppe. Market for solar thermal solutions in France is growing fast and the region Rhône-Alpes, where Voreppe is located, is actively promoting the development of solar thermal heating.
Other smaller deliveries were a solar thermal system to Oulun Seudun Sähkö and to Energi-Center Nordic in Stockholm. The system in Oulu is the biggest solar collector field in Finland.
Savosolar announced in November that it has signed a Memorandum of Understanding (MOU) with Guangzhou Power Supply Co., Ltd. which is a wholly-owned subsidiary of China Southern Power Grid Co., Ltd. China Southern Power Grid latest fiscal year revenue was approximately USD 73 billion. The MOU concerns co-operation in building a demonstration project of micro-energy network complementary with renewable energy in Nansha, Guangzhou.
At the end of the period, value of the projects in the company’s sales pipeline was approximately EUR 125 million. Of this, the total value of projects in bidding and planning phase amounted to approximately EUR 54 million and order backlog approximately 1,2 million euro. The sales pipeline includes all active projects of the company’s sales management system.
Costs and earnings
The costs relating to materials and services in 2018 totalled EUR 5.8 (0.8) million. The increase in costs was a consequence of the increased number of projects in the delivery phase. Thanks to the development projects it was possible to reduce the production costs both in terms of working hours and material use.
Personnel costs amounted to EUR 1.9 (1.8) million. Other operating expenses amounted to EUR 2.6 (2.3) million. Out of total costs, the biggest items were the expenses of the rights issue.
The operating result (EBIT) for 2018 amounted to EUR -5.4 (-4.9) million. The main reasons for increase in operating loss were the liabilities incurred during 2018 relating to quality problems of the collector models manufactured by the company between 2013 and 2015 which have been fixed since, and higher than expected project execution costs in the projects in Denmark.
Net financial income and expenses amounted to EUR -1.0 (0.8) million. The majority the financing costs were related to share issues.
The result for the report period stood at EUR -6.4 (-5.7) million. Earnings per share were EUR -0.02 (EUR -0.07).
COMPARISON BY REPORT PERIOD
|Revenue||5 633||831||4 304||219||1 329||612|
|Operating profit/loss (EBIT)||-5 374||-4 817||-2 938||-2 655||-2 436||-2 198|
|Profit/loss for the period||-6 423||-5 664||-3 778||-3 118||-2 645||-2 545|
|Earnings per share, EUR||-0.02||-0.07||-0.01||-0.03||-0.02||-0.07|
Total assets of the company on 31 December 2018 stood at EUR 6.4 (6.5) million. The inventories remained at the level of EUR 1.0 million (EUR 1.0 million). Cash and cash equivalents decreased by EUR 1.5 million. Current receivables increased from EUR 0.1 million to EUR 1.8 million.
Shareholders’ equity decreased from EUR 3.6 million to EUR 1.6 million. The equity including capital loans amounted to EUR 3.0 million at the end of report period. Savosolar’s equity ratio at the end of report period was 24.7 (56.4)%.
Liabilities amounted to EUR 4.4 (2.7) million, of which EUR 0.3 (0.3) million were long-term and EUR 4.2 (2.3) million short-term liabilities. Out of long-term liabilities the amount of loans from financing companies was at EUR 0.3 million. Out of short-term liabilities EUR 1.4 million were capital loans and EUR 0.8 million (EUR 0.2 million) were loans from financing companies, of which the proportion of Finnvera was 40 thousand and the proportion of Formue Nord Markedsneutral A/S was EUR 778.7 thousand. Out of short-term liabilities EUR 1.5 million (0.3) were account payables.
On May 21, 2018 Savosolar made an agreement on 12-month extension for maturity date of capital loans with Bank Suur-Savon Osuuspankki and Finnvera Oyj, according to which a total of EUR 1.4 million loans will mature on December 31, 2019. The maturity of the afore-mentioned capital loans with Suur-Savon Osuuspankki, EUR 1.2 million, has been renegotiated on February 20, 2019 so that the loans will be paid back in monthly instalments during 24 months beginning on April 2019.
In November 2019, Suur-Savon Osuuspankki also extended the validity period of its bank guarantee limit granted to Savosolar Plc by 12 months, up and until 30.11.2019. The limit amounts to EUR 2 million and the Company uses it in large projects for guarantees needed during deliveries and the warrant period, among others.
The financing position of Savosolar improved substantially after the rights issue and directed share issue arranged in the summer 2018. The company raised net proceeds of EUR 3.7 million after the transaction costs. However, the subscription of shares based on related warrants in December did not realize and the company decided in December to arrange a rights issue, totalling approximately EUR 5.3 million, after the reporting period.
Cash flow from operations was EUR -6.1 (-5.8) million and cash flow from investments EUR -0.2 (-0.2) million. Cash flow from financing was EUR 4.8 (5.7) million, out of which the share issues amounted to EUR 4.4 (5.8) million. On 31 December 2018, Savosolar’s cash and cash equivalents totalled to EUR 0.7 (2.2) million.
Aspects related to the Savosolar’s financing and liquidity are also described in the section “General risks and factors of uncertainty concerning operations”.
Investments and product development
Investments were EUR 0.2 (0.2) million and most of them were related to ordinary production maintenance. The company has no need for significant investments during the next few years because the production capacity has been increased to a level allowing the revenue of EUR 20-30 million.
Savosolar’s project on the development of a new type of solar thermal collector is part of the Government’s spearhead projects in cleantech industry. Business Finland (formerly Tekes), the Finnish Funding Agency for Innovation has granted support for the project by a loan amounting to a maximum of EUR 494 thousand, with the interest rate today being 1%. The project is focusing on the development of energy-efficient collectors, which are suited for large solar thermal fields and can be manufactured in mass production. The target is to lower the costs for logistics and installation as well as to improve the flexibility of installation. The project will last until the end of 2019 and its total budget amounts to EUR 0.7 million.
Personnel and management
At the end of the report period, Savosolar had 37 (36) employees. The average number of personnel was 35 (37).
On 31 December 2019 the company’s management team consisted of the following persons: Jari Varjotie, CEO; Raul Ikonen, CFO; Torben Frederiksen, Chief Technology Officer; Morten Hofmeister, Head of Projects and System Design; Aku Järvisalo, Production Manager; Pekka Karjalainen, Quality Manager; Kaj Pischow, Senior Advisor, and as a temporary member Martti Jalava, Director, Supply Chain.
Nalle Stenman, Chief Financial Officer left Savosolar by the end of October, and Raul Ikonen was appointed CFO as of 1 November. Torben Frederiksen was appointed as CTO in August. Patrick Jansson, Vice President of Sales left the company in April, and the sales organization has since reported directly to managing director Jari Varjotie.
Managing Director Jari Varjotie
Phone: +358 400 419 734
Savosolar Plc discloses the information provided herein pursuant to the Market Abuse Regulation ((EU) No 596/2014, “MAR”). The information was submitted for publication by the aforementioned person on 20 February 2019 at 3:00 p.m. (CET).
1 Income Statement
2 Balance Sheet
3 Cash Flow Statement
4 Calculation of Changes in Equity
5 Financial Ratios and Calculation of Key Figures
Savosolar with its highly efficient collectors and large-scale solar thermal systems has taken solar thermal technology to the next level. The company’s collectors are equipped with the patented nano-coated direct flow absorbers, and with this leading technology, Savosolar helps its customers to produce competitive clean energy. Savosolar’s vision is to be the first-choice supplier to high performance solar installations on a global scale. Focus is on large-scale applications like district heating, industrial process heating and real estate systems – market segments with a big potential for rapid growth. The company primarily delivers complete systems from design to installation, using the best local partners. Savosolar is known as the most innovative company in the business and aims to stay as such. The company has sold and delivered its products to 17 countries on four continents. Savosolar’s shares are listed on Nasdaq First North Sweden with the ticker SAVOS and on Nasdaq First North Finland with the ticker SAVOH. www.savosolar.com.
The company’s Certified Adviser is Augment Partners AB, email@example.com, phone: +46 8-505 65 172.
INCOME STATEMENT (FAS, unaudited)
|(1 000 euroa)|| Jul-Dec
|Revenue||4 304||219||5 633||831|
|Other operating income||0||-66||9||24|
|Materials and services||-4 523||-428||-5 788||-752|
|Personnel costs||-960||-760||-1 932||-1 829|
|Depreciations and write-downs||-383||-380||-719||-762|
|Other operating expenses||-1 376||-1 240||-2 578||-2 329|
|Operating profit/loss||-2 938||-2 655||-5 374||-4 817|
|Financial expenses||-863||-477||-1 072||-824|
|Profit/loss before appropriations and taxes||-3 778||-3 118||-6 423||-5 664|
|Net profit/loss for the reporting period/financial year||-3 778||-3 118||-6 423||-5 664|
|Earnings per share, undiluted, EUR||-0.01||-0.02||-0.02||-0.07|
|Earnings per share, diluted, EUR||-0.01||-0.02||-0.02||-0.07|
|Number of outstanding shares at the close of period||352 538 414||130 749 062||352 538 414||130 749 062|
|Average number of outstanding shares by month, adjusted by share issue||154 972 475||112 653 420||260 016 950||74 061 376|
|Number of outstanding shares, adjusted by dilutive effect||356 538 414||130 934 262||356 538 414||130 934 062|
BALANCE SHEET (FAS, unaudited)
|(EUR ‘000)|| 31 December
|31 December 2017|
|Intangible assets||1 348||1 628|
|Tangible assets||854||1 130|
|Shares in group companies||162||162|
|Fixed assets in total||2 364||2 920|
|Prepayments and accrued income||1 274||35|
|Cash and cash equivalents||747||2 212|
|Current assets in total||4 031||3 557|
|Assets in total||6 395||6 478|
| 31 December
|31 December 2017|
|Equity and liabilities|
|Unrestricted equity fund||29 273||24 919|
|Retained earnings||-21 736||-16 072|
|Net profit/loss for reporting period/financial year||-6 423||-5 664|
|Shareholder’s equity in total||1 585||3 653|
|Other obligationary provisions||319||172|
|Loans from financial institutions||314||312|
|Long-term liabilities in total||314||312|
|Capital loans||1 431||1 431|
|Loans from financial institutions||819||224|
|Advances received||1 501||315|
|Short-term liabilities in total||4 178||2 340|
|Liabilities in total||4 492||2 652|
|Total equity and liabilities||6 395||6 478|
CASH FLOW STATEMENT (FAS, unaudited)
|(EUR ‘000)|| Jul-Dec
|Jan-Dec 2018||Jan-Dec 2017|
|Cash flow from operating activities|
|Profit/loss for the financial period||-3 778||-3 118||-6 423||-5 664|
|Adjustments||621||880||1 915||1 608|
|Increase/decrease in current receivables||-728||192||-1 953||199|
|Increase/decrease in inventories||194||-121||14||-505|
|Increase/decrease in current interest-free payables||808||-325||1 369||-534|
|Interests from operating activities||-840||-463||-1 049||-810|
|Cash flow from operations||-3 723||-2 955||-6 127||-5 706|
|Cash flow from investing activities|
|Investments in subsidiaries||0||0||0||-28|
|Cash flow from investment activities||-163||-8||-162||-209|
|Cash flow from financing activities|
|Share issue||4 140||5 770||4 354||5 770|
|Proceeds from short-term loans||0||0||112||201|
|Repayment of long-term loans||-137||-380||-203||0|
|Proceeds from short-term loans||778||366||779||0|
|Repayment of short-term loans||-68||-702||-218||-284|
|Cash flow from financing activities||4 004||5 054||4 824||5 687|
|Change in cash and cash equivalents||118||2 091||-1 465||-228|
|Cash and cash equivalents at beginning of period||629||121||2 212||2 440|
|Cash and cash equivalents at end of period||747||2 212||747||2 212|
CALCULATION OF CHANGES IN EQUITY (FAS, unaudited)
|(EUR ‘000)||Share capital|| Unrestricted
|Retained earnings|| Result for
|Equity 1 Jan 2018||470||24 919||-21 736||0||3 653|
|Share issue||0||4 354||0||0||4 354|
|Result for financial year||0||0||0||-6 423||-6 423|
|Equity 31 Dec 2018||470||29 273||-21 736||-6 423||1 584|
|Equity 1 Jan 2017||470||19 149||-16 072||0||3 547|
|Share issue||0||5 770||0||0||5 770|
|Result for financial year||0||0||0||-5 664||-5 664|
|Equity 31 Dec 2017||470||24 919||-16 072||-5 664||3 653|
FINANCIAL RATIOS AND CALCULATION OF KEY FIGURES (FAS, unaudited)
|(EUR ‘000)||Jan-Dec 2018||Jan-Dec 2017|
|Result for reporting period/financial year||-6 423||-5 664|
|Cash and cash equivalents||747||2 212|
|Equity||1 585||3 653|
|Equity Ratio, %||24.7||56.4|
|Calculation of key figures|
|Equity ratio, %||Shareholders’ equity in Balance Sheet at the end of the period x 100 / Assets in total|
|Amount of shares, pcs||Amount of shares at the end of the period|
|Amount of shares on average, pcs||Weighted average number of shares during the period, adjusted by share issue|
|Earning per share, EUR||Result for financial year / Adjusted weighted average number of shares during the period|