Lehto Group Plc
28 January 2022, at 8.00 a.m. (EET)
Preparation of Lehto’s 2021 financial statements is still ongoing but according to the unaudited 2021 accounts net sales declined by 20% to approximately EUR 435 million and operating loss from continuing operations was approximately EUR -24 million.
The reason behind the operating loss was especially significant losses from six business premises projects. These projects caused loss of EUR -24 million in year 2021. Two of the projects are complete renovation projects (approximately EUR -10 million), two hotel projects (approximately EUR -4 million), one office building project (approximately EUR -8 million) and one industrial building project (approximately EUR -2). Losses are due to defects in project preparation, problems and delays in construction phase, fixed sales prices agreed in early phase and increased construction material costs. Lehto has already in 2019 decided to withdraw from complete renovation business and the commitments on two projects in question have been made already in 2017-2019.
The whole Business Premises Service Area has approximately EUR -29 million negative effect on Lehto’s 2021 operating result. Regardless of the increased material costs profit development on Housing Service Area was positive and better than budgeted.
Lehto has taken operational actions to improve project risk management on Business Premises Service Area. Implementation of the actions is ongoing by the new head of the Service Area who started his duty in the beginning of year 2022. The company is paying a specific attention on the selection of the projects and their fit on company’s resources and strategy. The company is also planning structural and operational changes to reduce the cost level.
Lehto will report Swedish operations as discontinued operations in 2021 financial statements. Loss from discontinuing operations was approximately EUR -7 million. The loss consists of losses in operative business, costs of closing down the business and impairment of deferred tax assets and capitalized R&D costs. The close down of the Swedish business does not have a significant effect on cash flow.
The cash reserves at the end of year 2021 were EUR 32.8 million and interest-bearing debt without IFRS 16 lease liabilities was EUR 45.8 million. EUR 25.0 million of the debt is related to syndicated RCF-credit limit agreement that is valid until December 31, 2022. According to the agreement, some of the debt will be paid back before the end of the contractual period and part of the debt will fall due at the end of the agreement. The agreement includes both partial collateral and financial covenants on EBITDA, interest-bearing net debt, net gearing and other covenants. The creditors have granted a waiver to temporarily exceed the covenant levels set in the original agreement. Lehto is having negotiations on refinancing the debt.
Outlook published in January-September business review report on 4 November 2021 was:
Lehto estimates that net sales in 2021 will be approximately 20% lower than in the previous year (EUR 544.7 in 2020) and that the operating result will be negative.
The main factors behind the declined outlook are some loss-making business premises projects and their delayed execution, rising prices of the building materials and their weak availability, and delays in the starts of new projects.
The main risks to the development of net sales and the operating result in 2021 concern the availability and rising prices of building materials and the completion of certain business premises projects according to the planned schedule and planned costs.
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