Dovre Group Oyj - Interim report (Q1 and Q3)

Dovre Group Trading Statement January 1 – March 31, 2020 : Dovre’s net sales and operating profit increased in line with expectations in Q1

Dovre Group Plc                                         Stock exchange release                              April 28, 2020 at 8.45 a.m.

DOVRE GROUP TRADING STATEMENT JANUARY 1 – MARCH 31, 2020

Dovre’s net sales and operating profit increased in line with expectations in Q1

Dovre Group Plc issues today a trading statement for the three months ended on March 31, 2020. The figures presented in this trading statement are not audited. Last year’s corresponding period in parentheses.

January – March 2020

• Net sales EUR 23.6 (17.3) million – increase 36.4%
  • Project Personnel: net sales EUR 19.4 (15.8) million – increase 23.0%
  • Consulting: net sales EUR 4.2 (1.6) million – increase 171.1%
• Operating result EUR 0.7 (0.3) million – increase 161.7%
• Net cash flow from operating activities EUR -1.3 (-1.0) million

Previous outlook for 2020 (published January 20, 2020):
Net sales and operating profit in 2020 are expected to improve compared to 2019 excluding non-recurring items.

Impacts of coronavirus pandemic and revised outlook

In Q1, Dovre's business suffered relatively little from the weakened market situation caused by the coronavirus, but during Q2 we have seen some impacts mainly in the Project Personnel segment. Due to the restrictions on movement and work enforced by various countries some of our clients have implemented temporary layoffs, early terminations and, in some cases, rate reductions. The additional effect of the recent oil price fluctuations is also impacting the market for consultants in the energy sector. With the majority of Dovre’s sales being in other currencies than the euro, the recent changes in currencies also impact negatively our figures. 

Based upon above, Dovre Group hereby changes its earlier outlook for 2020. 

New outlook for 2020 (issued on 28 April 2020):

The impact of the pandemic, oil price and currencies on Dovre's operations and business environment will depend on the duration and extent of the crisis. Based on the current situation, Dovre’s net sales are expected to be slightly below 2019 and the operating profit is expected to be in line with 2019 excluding non-recurring items and currency effects.

Due to the company's healthy balance sheet and sound business, we still consider Dovre's long-term growth opportunities and prospects to be good.

ARVE JENSEN, CEO:

Dovre’s first quarter performance was good and in line with our expectations. Following our Tech4Hire acquisition in summer 2019 and organic growth in our operations Dovre’s net sales increased to 23.6 million euros in Q1. Our relative profitability improved, and our operating profit more than doubled from the comparison period to 0.7 million euros. We saw profitable growth in both Project Personnel and Consulting segments.

In January, we announced the reorganization of our operations in Norway, with the aim of making better use of the professional skills of our personnel in serving customers and developing our business. The new organizational structure combines those businesses that have special features related to the energy sector and those that have core competencies related to consulting activities, into separate entities that are Dovre Group Energy AS and Dovre Group Consulting AS. We believe the change will have a positive impact on our customer relationships and staff in the future.

Both Project personnel and Consulting have had a very busy quarter, and it has been very nice to see that the development has been positive in all units. Singapore unit has continued the strong growth by securing new commissioning contracts, and North America unit has secured 2 new frame agreements this year.

The coronavirus pandemic, which spread also to our main markets, had little effect on our operations in Q1, but is starting to impact Q2 and onwards. We closely monitor market developments and will adjust our operations as necessary.

NET SALES

In Q1, Dovre Group’s net sales grew by 36.4% to EUR 23.6 (17.3) million. The acquisition of Tech4Hire AS, which was completed in the second quarter of 2019, explains around half of the revenue growth in the review period whereas the rest stems from the organic growth of the business.

Project Personnel accounted for 82 (91) percent and Consulting for 18 (9) percent of the Group’s net sales. Project Personnel’s net sales increased by 23% to EUR 19.4 (15.8) million and net sales for Consulting increased by 171.1%, totaling EUR 4.2 (1.6) million.

Considering the retrospective impact of the organizational changes in Norway in January 2020 to Q1 2019 figures, Project Personnel would have accounted for 76% of net sales and Consulting for 24% of new sales in the first quarter of 2019. Consequently, the growth of the Project business would have been 47%, of which the effect of the Tech4Hire acquisition would have been around half. Tech4Hire is fully reported in the Project Business. The consulting business, on the other hand, would have remained at the level of the comparison period.

Year-on-year fluctuations in foreign currency exchange rates, especially the depreciation of the Norwegian krone against the euro, impacted somewhat the Group’s net sales in Q1. At constant currencies, net sales would have increased by 43.0% year-on-year in Q1 instead of 36.4 per cent.

Net sales by reporting segment				1-3	1-3	Change	1-12
EUR million				2020	2019	%	2019
Project Personnel				19.4	15.8	23.0	77.0
Consulting				4.2	1.6	171.1	6.1
Group total				23.6	17.3	36.4	83.1

OPERATING RESULT

In Q1, the Group’s operating result improved to EUR 0.7 (0.3) million. Project Personnel’s operating result was EUR 0.6 (0.4) million. Consulting’s operating result was EUR 0.5 (0.1) million. The operating result of the Group’s Other functions was EUR -0.2 (-0.2) million.

Considering the retrospective impact of the organizational changes in Norway in January 2020 to Q1 2019 figures, the operating profit of Project Personnel would have been EUR 0.1 million and the operating profit of the consulting business EUR 0.4 million in the first quarter of 2019. Tech4Hire acquisition’s impact on Q1 2020 operating result is estimated to be around EUR 0.1 million.

Operating result				1-3	1-3	Change	1-12
EUR million				2020	2019	%	2019
Project Personnel				0.6	0.4	38.5	2.4
Consulting				0.5	0.1	224.5	0.6
Other functions				-0.2	-0.2	-3.5	-0.1
Unallocated *)				-0.1	-0.1	-48.6	-0.3
Group total				0.7	0.3	161.2	2.7

*) Unallocated expenses include amortization of customer agreements and relations, expenses recorded as a result of adoptation of IFRS 16 in 2019.

PERSONNEL

On March 31, 2020, Dovre Group employed 677 (525) people, 589 (484) of whom were employed by Project Personnel, 85 (37) by Consulting and 3 (4) by Other functions. The number of Project Personnel employees increased year-on-year due to both the Tech4Hire acquisition and organic growth, while the number of people in Consulting increased mainly due to the organizational change in Norway.

CASH POSITION

On March 31, 2020, the Group’s net debt was EUR 2.2 (1.4) million. The Group’s cash and cash equivalents totalled EUR 3.3 (4.0) million. The Group’s interest-bearing liabilities were EUR 5.5 (5.4) million, a total of EUR 3.0 (3.1) million of which were current and EUR 2.4 (2.3) million non-current. In addition, the Group has an unused credit limit of EUR 2.5 million.

In Q1, net cash flow from operating activities was EUR -1.3 (-1.0) million, which includes EUR -1.7 (-1.3) million change in working capital. Due to the nature of the business, the Group’s cash flow development is typically less favourable during the first half of the year. Due to this seasonality, the Q1 topline growth had a negative impact on Q1 cash flows, but this impact is expected to reverse on annual level. 

OTHER EVENTS DURING THE REVIEW PERIOD

The number of Dovre Group Plc shares increased to 102,956,494 shares on February 27, 2020, when Dovre Group directed 1,009,747 new shares in the company to the sellers of Tech4Hire. The directed issue was related to the payment of an additional purchase price of approximately EUR 1 million for the Tech4Hire acquisition. Part of the additional purchase price was to be used to subscribe for Dovre Group Plc's shares. Further information on the directed issue can be found in Dovre Group's stock exchange release issued on 19 February 2020 and in the stock exchange release issued on 25 June 2019.

EVENTS AFTER THE REVIEW PERIOD

Due to the prevailing uncertainty caused by the coronavirus pandemic in Dovre's operating environment, the Group’s Board of Directors decided to change its earlier dividend proposal that was issued in February to the Annual General Meeting to be held on 28 April 2020. The Board of Directors proposed, in line with the principle of caution, that no dividend is distributed at this stage by a resolution of the Annual General Meeting and that the Board of Directors is to be authorized by the AGM to decide in its discretion on October 26, 2020 on the payment of a maximum dividend of EUR 0.01 per share.

In Espoo, April 28, 2020

DOVRE GROUP PLC
BOARD OF DIRECTORS
For additional information, please contact:

Dovre Group Plc
Arve Jensen, CEO
(arve.jensen@dovregroup.com)

Mari Paski, CFO
(mari.paski@dovregroup.com)
tel. +358 20 436 2000

Dovre Group is a global provider of project management services. Dovre Group has two business areas: Project Personnel and Consulting. Dovre Group has offices in Canada, Finland, Norway, Russia, Singapore and the US, and employs more than 670 people worldwide. Dovre Group is listed on the Nasdaq Helsinki (symbol: DOV1V). Company website www.dovregroup.com.

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