Boreo Plc, INTERIM REPORT JAN. 1 TO MAR. 31, 2024

April 30, 2024, at 9:00 EET

Weak result, performance outlook improving

January-March 2024

• Net sales decreased by 20% to EUR 32.6 million (2023: 41.0).
• Operational EBIT declined by 72% to EUR 0.6 million (2023: 2.1) and accounted for 1.8% of net sales (2023: 5.1%).
• EBIT was EUR -0.4 million (2023: 1.4).
• The profit for the period under review totaled EUR -0.9 million (2023: 0.5).
• Net cash flow from operating activities was EUR 6.1 million that was partially positively influenced by the timing fluctuations in working capital items at the end of the quarter (2023: 0.8).
• Operational EPS was EUR -0.15 (2023: 0.28).
• EPS was EUR -0.45 (2023: 0.07).

 Financial guidance and business model

Boreo's primary objective is sustainable long-term profit generation. This is achieved with a business model that is based on the acquisition and ownership of great entrepreneurial companies with ability to generate sustainable long-term earnings growth and strong cash flows. The profits generated by the portfolio of companies are re-invested back to operations or to acquisitions with attractive expected returns on capital. The decentralized operating structure promoting culture of ownership and release of entrepreneurial energy is a core pillar of the firm’s business concept and sustainable earnings growth is ensured through the support and coaching of companies and the personnel.

Boreo’s 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.

Group's key figures

*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 2022. In Q1/2024 this net effect was EUR 0.13 per share and EUR 0.12 per share in Q1/2023.

Q1/2024 - CEO Kari Nerg:

Weak result, continued strong cash flow

The result of the first quarter of 2024 was weak. Operational EBIT declined significantly compared to last year and was EUR 0.6 million (1.8% of net sales). The market conditions remained challenging, net sales of the majority of our companies decreased compared to the previous year, and the Group's net sales decreased from EUR 41 million to EUR 33 million. In Finland, strikes in March resulted in the postponement of deliveries to the second quarter of the year. The negative impact of the delays on Group’s net sales was approximately EUR 2 million. The cost optimization measures implemented in the last six months had a minimal effect on the quarter's result. We expect annual fixed cost savings of at least EUR 1 million to support the company’s earnings from the second half of 2024 onwards.

We continued to manage working capital well and adjust the level of working capital to the lower level of activity. Trade working capital decreased in the first quarter from EUR 30 million to EUR 25 million and resulted in a strong operational cash flow of EUR 6 million. We expect working capital to rise over the coming months but target to maintain current levels at the end of the year. Due to the weak result, ROCE declined from 11% to 9.3%, and ROTWC from 28.5% to 27.6%.

Completion of refinancing to strengthen financial position

In March, we issued a new EUR 20 million hybrid bond and at the same time redeemed approximately EUR 16 million worth of old hybrid bond notes. The executed financing arrangements strengthened the company’s financial position and ensured that the company's financing costs remain at a reasonable level. As a result of the strong cash flow for the quarter and increased cash reserves from the refinancing process, net debt decreased from EUR 36 million to EUR 29 million. Net debt relative to the 12-month operational EBITDA was at 2.4x (2.5x in Q4 2023)

Improving outlook supported by the development of order books and implemented cost actions

The Group's profitability over the last six months has been weak due to the deteriorating demand outlook for our companies. Our order books declined during 2023, reaching its lowest point at the end of the year. In the first quarter of 2024, the order books grew significantly, and we expect both the improved demand outlook and implemented cost measures to support the Group's profitability gradually throughout the current year.

Goal to bring the company back to growth-track

In February 2024, we updated our ownership philosophy and strategy to steer the company towards its vision and long-term goals. Our short-term target is to bring the company back to growth-track and enable value creation by utilizing the updated strategy. To achieve this goal, we focus in the short-term on improving the profitability and capital efficiency of our companies, as well as strengthening the Group's financial position.

At the same time, we have initiated processes to crystallize our companies' medium- and long-term strategies. The focus in company-level plans is on the prospects to create long-term sustainable profit growth and return to working capital levels exceeding 50%. We are committed to implement the required actions to achieve the criteria we have set for ownership, and if the companies do not demonstrate their ability to achieve these criteria, we are ready to consider structural measures.

The company’ current financial performance is far from the goals we have set and the level at which we believe our companies are capable of operating in the long-term. Despite the current challenges, we are confident in both the value creation potential of our business model and the ability of our companies to return to the path of profit growth.

Briefing for investors, analysts and media

A webcast where CEO Kari Nerg and CFO Aku Rumpunen present the Q1 2024 Interim report will be held today, April 30, 2024, at 11:00 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/q1-2024.

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

Vantaa, April 30, 2024

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 the long-term. Boreo's business operations are organized into two business areas: Electronics and Technical Trade.

Boreo's primary objective is sustainable long-term profit generation. This is achieved with a business model that is based on the acquisition and ownership of great entrepreneurial companies with ability to generate sustainable long-term earnings growth and strong cash flows.  The profits generated by the portfolio of companies are re-invested back to operations or to acquisitions with attractive expected returns on capital. The decentralized operating structure promoting culture of ownership and release of entrepreneurial energy is a core pillar of the firm’s business concept and sustainable earnings growth is ensured through the support and coaching of companies and the personnel.

The Group's net sales in 2023 were EUR 161 million and it employs over 300 people in seven countries. The company’s headquarter is in Vantaa.