Vibrant Metering division growth (+22.2%)
Highlights
In 2023, SIT returned:
- Consolidated revenues of Euro 326.3 million (-17.0% on 2022);
- Heating & Ventilation Division sales of Euro 234.0 million (-25.8% on 2022);
- Metering Division Sales of Euro 88.6 million (+22.2% on the previous year), of which Smart Gas Metering sales of Euro 60.0 million (+24.0%) and Water Metering sales of Euro 28.6 million (+18.5%);
- Consolidated adjusted EBITDA of Euro 29.0 million (-38.5% on 2022).
- Consolidated adjusted net result reports a loss of Euro 0.3 million (adjusted net profit of Euro 10.9 million in 2022);
- Heating & Ventilation goodwill write-down of Euro 17.0 million on half-year reporting in view of sector outlook;
- Consolidated net result reports a loss of Euro 23.4 million (net profit of Euro 11.2 million in 2022);
- Operating cash flow of Euro -14.9 million, after investments of Euro 23.0 million;
- Net Financial Position of Euro 153.7 million, compared to Euro 130.5 million at December 31, 2022.
The Q4 2023 results report:
- Consolidated revenues of Euro 84.2 million (-18.2% on Q4 2022);
- Heating & Ventilation Division sales of Euro 57.9 million, -28.1% on Q4 2022;
- Metering Division Sales of Euro 24.7 million (+16.8% on Q4 2022), including Smart Gas Metering sales of Euro 15.5 million (+1.0%) and Water Metering sales of Euro 9.1 million (+58.7%).
The renegotiation with the main lenders has been completed in the context of which the majority shareholder Technologies S.A.P.A. of F.D.S. S.S. provided a shareholder loan of Euro 5 million.
***
Padua, April 24, 2024 – The Board of Directors of SIT S.p.A., listed on the Euronext Milan segment of the Italian Stock Exchange, in a meeting today presided over by Federico de’ Stefani, the Chairperson and Chief Executive Officer of SIT, approved the 2023 consolidated results.
Federico de’ Stefani, Chairperson and Chief Executive Officer of SIT stated:
“Enterprises across various sectors in 2023 faced a challenging global economic environment, including the “Heating” sector in which SIT is engaged. Uncertainty surrounding the only recently approved EPBD regulation, the cancellation of incentives and the impacts of inflation and high interest rates have severely slowed down household investment. These factors explain the saturation of warehouses, resulting in the longer than originally forecast destocking of the entire supply chain, both in Europe and in United States.
This challenging marketplace was partly offset by the excellent Metering division performance, which returned double-digit growth within a favourable market, and the success of the water metering market positioning strategy.
In order to deal with this changing environment compared to previous years, we undertook a number of actions. These include the new corporate organisation, the execution of strategic partnerships which accelerated the company’s entry into complementary businesses to the core markets, and the cost streamlining strategies.
In view of the initiatives undertaken, which shall be closely focused upon again in 2024, we expect the two main improvement objectives – i.e. margins and the net financial position – to satisfy all stakeholders.”
KEY FINANCIALS
| (Euro.000) | 2023 | % | 2023 | % | change % | ||
| Revenues from contracts with customers | 326,261 | 100.0% | 393,305 | 100.0% | -17.0% | ||
| Adjusted EBITDA | 28,971 | 8.9% | 47,099 | 12.0% | -38.5% | ||
| EBITDA | 21,677 | 6.6% | 38,209 | 9.7% | -43.3% | ||
| Adjusted EBIT | 77 | 0.0% | 19,447 | 4.9% | -99.6% | ||
| EBIT | (25,219) | -7.7% | 10,557 | 2.7% | -338.9% | ||
| Result before taxes (EBT) | (31,300) | -9.6% | 13,568 | 3.4% | -330.7% | ||
| Net Profit | (23,388) | -7.2% | 11,213 | 2.9% | -308.6% | ||
| Adjusted Net Profit | (349) | -0.1% | 10,898 | 2.8% | -103.2% | ||
| Cash flow from operating activities | (14,923) | (13,145) | |||||
| (Euro.000) | 31/12/2023 | 31/12/2022 |
| Net financial debt | 153,690 | 130,501 |
| Net trade working capital | 79,859 | 73,752 |
| Net trade working capital/Revenues | 24.5% | 18.8% |
Sales performance
Consolidated Revenues by Division
| (Euro.000) | 2023 | % | 2022 | % | diff | change % |
| Heating & Ventilation | 233,997 | 71.7% | 315,338 | 80.2% | (81,340) | (25.8%) |
| Metering | 88,619 | 27.2% | 72,516 | 18.4% | 16,103 | 22.2% |
| Total sales | 322,617 | 98.9% | 387,854 | 98.6% | (65,237) | (16.8%) |
| Other revenues | 3,644 | 1.1% | 5,451 | 1.4% | (1,807) | (33.1%) |
| Total sales | 326,261 | 100% | 393,305 | 100% | (67,044) | (17.0%) |
Consolidated Revenues by Geographic Area
| (Euro.000) | 2023 | % | 2022 | % | diff | change % |
| Italy | 97,346 | 29.8% | 99,452 | 25.3% | (2,106) | (2.1%) |
| Europe (excluding Italy) | 151,359 | 46.4% | 169,396 | 43.1% | (18,037) | (10.6%) |
| The Americas | 47,144 | 14.4% | 85,481 | 21.7% | (38,337) | (44.8%) |
| Asia/Pacific | 30,412 | 9.3% | 38,976 | 9.9% | (8,564) | (22.0%) |
| Total sales | 326,261 | 100% | 393,305 | 100% | (67,044) | (17.0%) |
2023 consolidated revenues were Euro 326.3 million, decreasing 17.0% on 2022 (Euro 393.3 million).
Heating & Ventilation Division
Heating & Ventilation Division sales in 2023 totalled Euro 234.0 million, -25.8% on Euro 315.3 million in 2022 (-25.1% at like-for-like exchange rates).
The Division in the fourth quarter returned sales of Euro 57.9 million, decreasing 28.1% on Q4 of the previous year (Euro 80.5 million).
Q4 2023 saw a turnaround in the Heating end market from the preceding quarters – at least for boilers. Consumer sales were in fact substantially in line with Q4 2022 after seeing significant declines in each of the preceding quarters. Heat pumps again performed poorly in Q4.
Against this market backdrop, SIT customers have operated with still substantial stock levels. These improvements in Q4 have therefore not yet translated into a recovery for SIT’s revenues.
The following table presents Heating & Ventilation Division core sales by region according to management criteria:
| (Euro.000) | 2023 | % | 2022 | % | diff | change % |
| Italy | 36,675 | 15.7% | 56,116 | 17.8% | (19,441) | (34.6%) |
| Europe (excluding Italy) | 119,632 | 51.1% | 138,022 | 43.8% | (18,390) | (13.3%) |
| The Americas | 44,767 | 19.1% | 82,839 | 26.3% | (38,072) | (46.0%) |
| Asia/Pacific | 32,923 | 14.1% | 38,361 | 12.2% | (5,438) | (14.2%) |
| Total sales | 233,997 | 100% | 315,338 | 100% | (81,340) | (25.8%) |
Sales in Italy decreased 34.6% on 2022. This contraction was seen across all the main products and reflects the absence in 2023 of sector incentives, in addition to the slowdown of the home renovation market. We highlight the particularly weak performance of the Pellet Stoves applications (-77.5%) in the Direct Heating segment, which in 2022 benefited from the increase in the price of the gas.
Sales in Europe (excluding Italy) in 2023 decreased Euro 18.4 million (-13.3%) on the previous year. Turkey, the top shipping market with 18.1% of division sales, grew 10.9% (Euro 4.2 million), particularly thanks to Fans for Central Heating applications, impacted by supplier difficulties in H1 2022. The UK, 8.5% of division sales, was substantially in line with 2022, with the product families reporting divergent performances and flues growth of Euro 2.5 million (+25.6%) compared to 2022. Central Europe reported results overall in line with the Division (-28.5%), with Heat Recovery unit sales however in line (+1.0%) with the previous year.
Sales in the Americas contracted 46.0% (immaterial exchange rate impact). The reduction affected Water Heating Storage for Euro 10.2 million, while the Direct Heating applications of fireplaces (-Euro 24.3 million, -55.4%) were impacted by the poor new constructions performance to which this segment is linked.
Asia/Pacific contracted 14.2% (-9.2% at like-for-like exchange rates), with sales of Euro 32.9 million (Euro 38.4 million in 2022). China, 9.0% of division sales, decreased 11.6% on 2022 (-5.2% at like-for-like exchange rates). Australia in 2023 reported sales of Euro 5.9 million, decreasing 27.9% (23.3% at like-for-like exchange rates).
Metering Division
Metering Division sales were Euro 88.6 million (Euro 72.5 million, growing 22.2% on the previous year).
Sales in the Smart Gas Metering sector totalled Euro 60.0 million, increasing 24.0% on 2022. The performance was due to the Group’s strong positioning on the Italian market and the new development and replacement projects launched by the major clients. Sales in Italy accounted for 96.6% of the total, while overseas sales accounted for 3.4% (from Greece and Central Europe).
Water Metering sales totalled Euro 28.6 million, up 18.5% on 2022. Portugal accounts for 19.0% of sales, Spain for 36.2%, the rest of Europe for 34.7% and the Americas and Asia respectively for 7.3% and 2.7%.
Operating performance
2023 consolidated revenues were Euro 326.3 million, decreasing 17.0% on 2022 (Euro 393.3 million).
Adjusted EBITDA of Euro 29.0 million decreased 38.5% on the previous year (Euro 47.1 million) and was impacted by volumes, particularly in the Heating & Ventilation division, which was only partially offset by the Metering division and the cost streamlining and containment actions.
Purchase costs of raw materials and consumables, including changes in inventories, amounted to Euro 175.8 million (53.9% of revenues, compared to 54.3% in 2022).
Service costs totalled Euro 46.5 million, compared to Euro 52.3 million in the previous year (respectively 14.3% and 13.3% of revenues).
Personnel expense amounted to Euro 80.7 million, compared to Euro 80.2 million in the previous year (accounting for 24.7% of revenue, increasing on 20.4% in the previous year). These include Euro 5.3 million for the parent company restructuring transactions for Euro 2.5 million and the Dutch company for Euro 2.3 million, whose production facility is currently being closed.
Amortisation, depreciation and write-downs of Euro 47.1 million rose on the previous year (Euro 27.8 million), as a reflection of the new investments in the year and the new operating leases recognised as per IFRS 16; in addition, following the impairment test carried out on drafting the half-year report, in view of the domestic gas boilers trend and outlook as a result of the energy transition, the need to adjust the carrying amount of the Heating & Ventilation CGU to its recoverable value emerged, resulting in a write-down of Euro 17.0 million.
Adjusted EBIT was Euro 0.1 million, compared to Euro 19.4 million in 2022.
EBIT, in addition to the operating performance, was particularly impacted by the write-down as a result of the impairment test, decreasing from a profit of Euro 10.6 million in 2022 to a loss of Euro 25.2 million in 2023.
Net financial charges in 2023 totalled Euro 6.9 million, compared to net financial income of Euro 4.5 million for the previous year. This was impacted in 2022 by the change in the fair value based on the market value of the Warrants, which resulted in financial income of Euro 8.7 million.
Adjusted net financial charges, net therefore of the above-stated fair value changes, in 2023 totalled Euro 6.9 million (Euro 4.2 million in the previous year). This increase related both to the higher debt and increased interest rates.
Income taxes were a positive amount of Euro 7.9 million and reflect the accrual of deferred tax assets deriving mainly from the recoverable tax losses matured by a number of overseas companies, in addition to the parent company.
The net result for the year was a loss of Euro 23.4 million, compared to a profit of Euro 11.2 million in 2022.
The adjusted net result was a loss of Euro 0.3 million (adjusted net profit of Euro 10.9 million in 2022).
Cash Flow performance
The net financial debt at December 31, 2023 was Euro 153.7 million, compared to Euro 130.5 million at December 31, 2022. The movements in the net financial position are reported below:
| (Euro.000) | 2023 | 2022 |
| Cash flow from current activities (A) | 27,472 | 46,372 |
| Change in inventories | 9,399 | (19,730) |
| Change in trade receivables | 951 | (6,715) |
| Change in trade payables | (15,129) | (675) |
| Change in other current assets and liabilities and for taxes | (14,591) | (5,514) |
| Cash flow from changes in Working Capital (B) | (19,370) | (32,634) |
| CASH FLOW FROM OPERATING ACTIVITIES (A + B) | 8,102 | 13,738 |
| Cash flow from investing activities (C) | (23,025) | (26,883) |
| CASH FLOW FROM OPERATING & INVESTING ACTIVITIES (A + B + C) | (14,923) | (13,145) |
| Changes for interest | (7,162) | (3,327) |
| Changes MTM derivatives and amortised cost | 113 | 1,702 |
| Changes in translation reserve | (839) | 857 |
| Changes to financial assets | 1,409 | – |
| Treasury share purchases | – | (599) |
| Dividends | – | (7,299) |
| IFRS 16 | (1,785) | (1,963) |
| Change in net financial position | (23,187) | (23,774) |
| Opening net financial position | 130,501 | 106,729 |
| Closing net financial position | 153,690 | 130,501 |
Cash flows from operating activities of Euro 27.5 million were generated in 2023, compared to Euro 46.4 million in 2022, with the reduction relating to the operating performance.
Working capital of Euro 19.4 million was absorbed in 2023 (absorption of Euro 32.6 million in the previous year).
Inventories generated cash of Euro 9.4 million in 2023, while in 2022 absorbing Euro 19.7 million. This is due to the altered marketplace in the year, and particularly in terms of the Heating & Ventilation division. Trade payables reflect procurement volumes, with a reduction in value and cash absorption of Euro 15.1 million in 2023, compared to substantial stability in 2022. Trade receivables generated Euro 1.0 million in 2023, compared to an absorption of Euro 6.7 million in 2022 due to the increased revenues in the final part of the previous year.
In terms of the other working capital items, we highlight the outlay in Q1 2023 for the settlement with a customer following the reaching of an agreement in Q3 2022, and the payment of income taxes in the year of Euro 4.0 million.
Investing activities absorbed cash of Euro 23.0 million, compared to Euro 26.9 million in 2022.
Cash flows from operating activities after investments of Euro 14.9 million were therefore absorbed, compared to an absorption of Euro 13.1 million in the preceding year.
In terms of financial activities cash flows, we highlight in 2023 interest of Euro 7.2 million, compared to Euro 3.3 million in 2022.
Allocation of the result for the year
In accordance with the provisions of IAS 1, simultaneous to the authorization of the publication of the separate financial statements, the Board of Directors of SIT S.p.A. proposes to the Shareholders’ Meeting:
- to utilise the extraordinary reserve of Euro 24,726,475 to cover the net loss for the year;
- to utilise the first-time application of IAS/IFRS reserve of Euro 564,567 to cover the net loss for the year;
- to utilise the currency differences reserve of Euro 161,178 to cover the net loss for the year, as the requirements for its establishment as per Article 2426, No. 8-bis of the Civil Code are no longer applicable;
- to carry forward the residual loss of Euro 3,866,613.
Subsequent events
In January 2024, the Company was awarded a “Silver” rating as part of its annual CSR (Corporate Social Responsibility) performance assessment conducted by EcoVadis, an international ratings agency in the ESG field.
Despite being awarded the same rating as the previous year, SIT achieved a higher score, improving from the 85th percentile to the 94th percentile, placing it in the top 4% of companies in the sector under analysis (top 10% the previous year).
The downsizing of the production unit of the Dutch subsidiary, announced on November 9, 2023 (commencement date of consultations with the local competent bodies), is continuing as planned. Full subscription of the affected employees to the company’s proposed social security plan was formalised in February 2024. The project conclusion timeframe for the first half of 2024 was therefore confirmed.
At the MCE – Mostra Convegno Expocomfort exhibition held between March 12 and 15, 2024, SIT presented the new residential heat pump fan, developed in synergy with Panasonic Industry, a leading HVAC (Heating, Ventilation, Air Conditioning) technologies enterprise. This is SIT’s debut in the electric heat pump sector and constitutes one of the Group’s pillars for its home heating sector decarbonisation strategy. The collaboration seeks to develop a complete fans solution designed specifically for residential heat pumps. Distribution to the market of the integrated motor-fan system will be overseen by SIT and shall be available from early 2025.
On January 15, 2024, the Portuguese-registered company Aquametric Solutions, S.A. was incorporated, with registered office in Lisbon and the SIT Group holding a 50% stake. The remaining 50% is held by the Swiss technology partner GWF AG. The company shall be involved in the manufacture of Smartio, a new “smart” residential water meter based on ultrasonic technology.
SIT-MBT S.r.l, a joint venture of SIT in the range hood fans sector, became operative on April 1, 2024. SIT’s business unit dedicated to ventilation and components for range hoods and pellet stoves and 100% of the innovative Motors & Blowers Technology S.r.l. (MBT) start-up launched by a group of established and recognised managers with extensive experience in the industry, were merged into the company. Wentelon – a ventilation motors supplier partner – also joined the ownership. The latter’s Chinese production facilities are at the cutting-edge of the sector and shall ensure the technology and competitiveness for the new initiative.
Notice that on 22 and 23 April 2024, certain agreements were signed with the Company’s main medium-term lenders amending the relevant existing loan relationships. For more information, please refer to the following section of this press release.
Outlook
The initial months of 2024 provided good visibility on the Metering business which, thanks to the awarding of tenders over recent months and the advancement of the ongoing projects with leading customers, in addition to the solid fundamentals associated with the investments by the utilities, forecasts high single-digit growth this year.
The Heating & Ventilation business unit is expected to recover during the year, with the first quarter again set to decline by double-digit, with a slight single-digit reduction in Q2 compared to the previous year. Visibility for the second half of the year currently indicates that the final two quarters of the year may improve upon the first half of the year.
The focus in 2024 for the entire Group shall centre on improved margins (EBITDA) as a result of the streamlining of overheads for approx. Euro 2 million, and the ongoing reorganisation of the production structure for Euro 2.5 million.
The consolidated EBITDA margin is expected to grow by between 100 and 200 basis points.
Planned investments are being closely controlled and shall focus in particular on research and development, in addition to the completion of the new headquarters, for between Euro 20-25 million. Net financial debt of between Euro 140 and 147 million is forecast, decreasing on 2023.
Renegotiation with major financiers
Following what was communicated on 29 September 2023 and in the Half-Year Financial Report as at 30 June 2023, the Company announces that it has signed, on 22 and 23 April 2024, with the main medium-term lenders of the Company, a series of agreements amending the existing financing contracts and that on 22 April 2024 the bondholders’ meeting approved the proposed agreement to amend the bond loan regulation.
The amending agreements provide, regarding some bank financing relationships, the extension of the original maturities by 24 months and the remodulation of the repayment profile in increasing installments, with maintenance of the current annual and interim maturities. The amending agreements – which go beyond the previous standstill regime – also provide for the redefinition of the financial covenants applicable to the relevant medium-term financing relationships in a manner consistent with the financial renegotiation described and the economic and financial profile of the new industrial and financial plan of the Company.
The medium-term financing relationships – which are not backed by any real guarantee – have also been modified in relation to a series of commitments and limitations already originally foreseen, as usual in similar contracts. Further limits to the distribution of dividends and reserves have also been introduced, varying according to the level of consolidated financial leverage. Based on the results as at 31 December 2023, the Company cannot distribute dividends or reserves in consideration of the fact that the ratio between the net financial position and EBITDA is higher than the new thresholds established for this purpose by the aforementioned bank loans and the bond loan, respectively indicated in the ratio of 3.5x and 3x.
As part of the broader renegotiation, a shareholder loan was provided by the majority Shareholder Technologies S.A.P.A. di F.D.S. S.S. equal to Euro 5 million, bearing interest at an annual rate of 5%, with capitalization of the related financial charges, subordinated to the financial debt of the Company as well as convertible into capital and/or equity of the Company. The shareholder loan assumes importance as a transaction with related parties of lesser importance pursuant to the combined provisions of the Regulation adopted by Consob with resolution no. 17221 of 12 March 2010, as subsequently amended and integrated, and of the Procedure for Transactions with Related Parties approved by the Company on 11 June 2021. Therefore, in application of the Procedure for Transactions with Related Parties, for the purposes of its approval, the Shareholder loan contract was previously subjected to evaluation by the Company’s Related Party Transactions Committee, which expressed its reasoned, non-binding favorable opinion regarding the Company’s interest in signing the same and the convenience and substantial correctness of the related conditions.
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Declaration of the manager responsible for the preparation of the Company’s accounts
The manager responsible for the preparation of the Company’s accounts, Paul Fogolin, hereby declares, as per article 154-bis, paragraph 2, of the “Testo Unico della Finanza”, that all information related to the Company’s accounts contained in this press release are fairly representing the accounts and the books of the Company. This press release and the results presentation for the period are available on the website www.sitcorporate.it in the Investor Relations section.
Today at 3PM, SIT management will hold a conference call to present to the financial community and the press the 2023 results. You may participate in the conference call by connecting to the following link bit.ly/4dbfOKf
The support documentation shall be published in the “Investor Relations” section on the company website (www.sitcorporate.it) before the conference call.
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Annex 1
BALANCE SHEET
| (Euro.000) | 31/12/2023 | 31/12/2022 | |
| Goodwill | 70.946 | 87.946 | |
| Other intangible assets | 50.781 | 55.276 | |
| Property, plants and equipment | 105.270 | 106.103 | |
| Investments | 657 | 630 | |
| Non-current financial assets | 2.533 | 5.186 | |
| Deferred tax assets | 18.874 | 10.492 | |
| Non-current assets | 249.061 | 265.633 | |
| Inventories | 83.315 | 91.352 | |
| Trade receivables | 63.458 | 63.800 | |
| Other current assets | 14.264 | 12.597 | |
| Tax receivables | 3.752 | 2.280 | |
| Other current assets | 6.630 | 6.269 | |
| Cash and Cash Equivalents | 8.700 | 23.535 | |
| Current assets | 180.119 | 199.833 | |
| Total assets | 429.181 | 465.466 | |
| Share capital | 96.162 | 96.162 | |
| Total Reserves | 70.350 | 58.120 | |
| Net Profit | (23.388) | 11.213 | |
| Minority interests net equity | – | – | |
| Shareholders’ Equity | 143.124 | 165.495 | |
| Medium/long-term loans and borrowings | 58.182 | 77.968 | |
| Other non-current financial liabilities and derivative financial instruments | 51.434 | 53.553 | |
| Provisions for risks and charges | 10.513 | 13.844 | |
| Post-employment benefit provision | 5.096 | 5.093 | |
| Other non-current liabilities | 6 | 4 | |
| Deferred tax liabilities | 12.094 | 15.005 | |
| Non-current liabilities | 137.325 | 165.467 | |
| Short-term bank loans | 50.809 | 23.551 | |
| Other current financial liabilities and derivative financial instruments | 8.596 | 5.235 | |
| Trade payables | 66.915 | 81.400 | |
| Other current liabilities | 20.768 | 23.113 | |
| Tax payables | 1.645 | 1.205 | |
| Current liabilities | 148.733 | 134.504 | |
| Total Liabilities | 286.057 | 299.971 | |
| Total Shareholders’ Equity and Liabilities | 429.181 | 465.466 |
Annex 2
INCOME STATEMENT
| (Euro.000) | 2023 | 2022 |
| Revenues from sales and services | 326.261 | 393.305 |
| Raw materials, ancillaries, consumables and goods | 167.211 | 233.573 |
| Change in inventories | 8.578 | (19.886) |
| Services | 46.525 | 52.301 |
| Personnel expense | 80.716 | 80.182 |
| Depreciation, amortisation and write-downs | 47.090 | 27.771 |
| Provisions | 1.015 | 8.722 |
| Other charges (income) | 345 | 85 |
| EBIT | (25.219) | 10.557 |
| Investment income/(charges) | – | (166) |
| Financial income | 942 | 9.263 |
| Financial charges | (7.827) | (4.760) |
| Net exchange gains (losses) | 804 | (1.326) |
| Impairments on financial assets | – | – |
| Profit before taxes | (31.300) | 13.568 |
| Income taxes | 7.912 | (2.355) |
| Net profit for the year | (23.388) | 11.213 |
| Minority interest result | – | – |
| Group net profit | (23.388) | 11.213 |
Annex 3
CASH FLOW STATEMENT
