Q4 and FY 2024 - Harvia Plc - Full Analysis
Revenue growth exceeding expectations widely; EBIT pressured by one-time growth expenses and unfavorable product mix
Today, Harvia, the world’s leading sauna and spa manufacturer, reported its Q4 and FY 2024 results. Intraday, the stock gapped down roughly 13.5%, but closed at -4.0%. Yesterday, we shared our preview to recap the main trends for the longer-term investment case.
On the topic of temporarily elevated growth expenses, we wrote the following:
However, what’s more likely is a balanced approach of growing the top-line faster and seeing more “limited” margin expansion in line with our current assumptions. For a high-quality company like Harvia with a >30% ROIIC on tangible assets, and wiggle room on growth investments expensed fully in its P&L (sales, marketing), it makes more sense to drive the top-line, potentially faster than our 9% organic growth rate beyond FY27. Striving for the best margins while not growing the top-line isn’t in shareholders’ best interest.
Indeed, that’s what we saw in Q4, but much more dramatically than we would have assumed. Additionally, the product mix was unfavorable with sauna rooms and steam saunas outgrowing heating equipment, (very high-margin) control units and spare parts (there was also an accounting/reporting shift to accessories).
So, should we be worried? Time to take a closer look at the numbers, our valuation model, and the key takeaways from this morning’s conference call.