January–December 2018: Rettig Group increased its ownership in Terveystalo and eQ
Unless otherwise stated, the figures refer to 1 January–31 December 2018 and the corresponding period in 2017. All figures are audited and prepared in accordance with International Financial Reporting Standards (IFRS).
Group financial highlights
- Turnover in 2018 was below 2017 due to slightly lower sales in both Nordkalk and Rettig ICC. Nordkalk’s turnover decreased primarily due to lower sales in Scandinavia. Sales prices in Rettig ICC were generally on expected levels while sales volumes in certain key markets were lower than in the previous year.
- EBITDA declined mainly due to lower EBITDA in Rettig ICC following increased costs and a strong euro.
- EBIT and net profit were further impacted negatively by a lower result from the associated companies Alandia and NorFraKalk. Non-recurring items in EBIT included in 2017 a capital gain of EUR 14 million from a real estate sale and lease back arrangement of Rettig ICC’s warehouse in Zonhoven, Belgium as well as a write down of EUR 19 million relating to previous investments in Nordkalk’s Bunge quarry project in Gotland, Sweden.
- Cash flow from operating activities was reduced due to lower EBITDA and increased net working capital.
- Significant additional investments were made in Terveystalo and eQ shares which increased interest bearing net debt.
Tomas von Rettig, President and CEO of Rettig Group:
Rettig Group had an active year with two major transactions with which we significantly increased our ownership in both Terveystalo and eQ. These are both best-in-class companies where we see potential for long-term, sustainable value creation. Terveystalo had a good year in 2018 with strong performance in both growth and profitability. For eQ the year 2018 was another record year and the Group’s profit grew by 12 per cent.
We also continued to develop our privately held companies and took several important steps that we believe will secure long-term competitiveness, profitability and value creation in these companies. In 2018, Rettig ICC faced a challenging market environment with a drop in market demand for radiators in several key geographies as well as cost inflation. The development in Nordkalk’s markets was mixed with strong performance in the Central European markets and challenges in Scandinavia. Performance improvement programmes will be implemented in 2019 in both of these companies with benefits expected from 2020 onwards.
Alandia had a transformational year and is now clearly focused on marine insurance. With a new sharpened focus and strategy, Alandia is in a good position to improve profitability. Anchor had a good year and managed to navigate through volatile markets.
Rettig Group invests in companies operating in different industries, which reduces the cyclicality and volatility of the combined group. Our private core investments are Rettig ICC (indoor climate comfort), Nordkalk (limestone) and Alandia (marine insurance). Our listed core investments are Terveystalo (healthcare services) and eQ (asset management and corporate finance). Our financial investments are managed through Anchor.
Portfolio Company highlights in 2018
Private Core Investments
Rettig ICC’s turnover declined to EUR 682 million (2017: EUR 684 million) due to a drop in market demand for radiators in a number of countries. The growth in other product categories was enough to compensate for the decline in the overall radiator business, but not for Rettig ICC to grow. EBITDA declined to EUR 57 million (2017: EUR 63 million) as input costs increased and market dynamics did not allow for matching of price increases. The strong euro had a significant impact on profitability as Rettig ICC has a larger share of costs than sales within the euro area. The year 2019 will be the third challenging year in a row for Rettig ICC, but the company is convinced that with the actions taken and planned, including a comprehensive performance improvement programme launched at the beginning of 2019, it will be able to grow and improve profitability.
Nordkalk’s turnover declined to EUR 300 million (2017: EUR 304 million) and EBITDA to EUR 53 million (2017: EUR 54 million) as a result of mixed development in different market areas and customer segments. In Poland (Central Europe), all customer segments performed well. In North East Europe and Scandinavia, accelerated competition, particularly in the quicklime and slaked lime (calcium oxide and hydroxide) business, affected Nordkalk’s financial development. In Turkey, the economy slowed down and the currency weakened. This had a negative effect on sales to customers in the construction sector. In 2019 Nordkalk’s core business in limestone is expected to continue strongly, and turnover and EBITDA are estimated to increase. In the quicklime market, the competition will remain challenging. Positive development will be boosted by a performance improvement programme launched at the beginning of 2019.
Alandia improved its net premium income to EUR 50 million (2017: EUR 38 million). The company experienced strong growth but the financial result was weaker than the previous year as a result of lower investment return and a weaker technical result due to higher than expected claims costs. In 2018, Alandia restructured its organisation in order to focus on marine and yacht insurance, which accounts for 96 per cent of Alandia’s premium volume. Rettig Group owns a 25 per cent stake in Alandia.
Listed Core Investments
Terveystalo’s revenue increased by 8 per cent to EUR 745 million in 2018 (2017: EUR 690 million). Adjusted EBITA was EUR 88 million, corresponding to 11.8 per cent of revenue. 2018 was Terveystalo’s fifth consecutive year of robust growth. The company saw broad scale growth in all customer groups and improved its financial performance in every quarter. An acquisition of Attendo’s Finnish health care operations was completed at the end of 2018. Rettig Group owns a 16.52 per cent stake in Terveystalo.
eQ increased its net revenue by 12 per cent to EUR 45 million (2017: EUR 41 million) and its operating profit to EUR 22 million (2017: EUR 20 million). Asset Management’s fee and commission income grew by 8 per cent to EUR 36.7 million despite the challenging market situation. The growth was faster than the market due to, above all, the good sales of real estate funds and private equity products. Rettig Group owns a 15.39 per cent stake in eQ.
Anchor’s investment return was below the previous year due to challenging financial markets in 2018. The return was 4.3 per cent compared to 8.4 per cent in 2017, with private equity investments performing best. The risk level in the portfolio was reduced during the year, and consequently, cash level was high at year end. All sub-portfolios performed well compared to the relevant market benchmarks in 2018. The net asset value of the investment portfolio at end of the year was EUR 73 million (2017: EUR 70 million).
Outlook for 2019
Global economic uncertainty has increased and economic growth in Europe and Asia is expected to slow down in 2019. As a result, we do not expect economic conditions to materially help drive profitability in our private core investments. In 2019, we will focus on improving the cost competitiveness and growth prospects of these companies in order to support profitability and cash flow generation.
Events after the reporting period
In January 2019, Marcel Gestranius was appointed Acting CEO of Nordkalk. The process for recruiting a new CEO is ongoing.
In February 2019, Tomas von Rettig was elected Chairman of the Board of Rettig Group and Matts Rosenberg was appointed Chief Executive Officer of Rettig Group (from 1 March 2019).
Annual report and financial statements for 2018 published
Financial calendar 2019
The January-March Interim Management Statement will be published on 29 April 2019, the January-June interim report on 26 August 2019 and the January-September Interim Management Statement on 1 November 2019.
Tomas von Rettig, President and CEO, Rettig Group
Pia Dahlqvist, Head of Communications and HR, Rettig Group
Tel. +358 (0)40 526 7813