Boreo Plc    Investor news    29 February 2024 at 09:00 EET

Boreo crystallizes its playbook to achieve sustainable profit growth and to improve return on capital

As continuation to the systematic development work of its operating model, Boreo has during the past quarters carried out a strategic review of its company portfolio. The focus of the review has been on the evaluation of the prospects of the Group companies to create long-term sustainable profit growth and return that exceeds Return on Trade Working Capital (ROTWC) of 50%. ROTWC is a KPI that Boreo uses in steering of its companies and incentives of its key employees. The 50% target level has been set as a minimum mid- to long-term target for the Group companies. Due to the capital light nature of Boreo’s businesses, the ROTWC development impacts directly the group-level Return on Capital Employed (ROCE).

Following the review, Boreo’s existing long-term financial strategic targets – minimum 15% average annual operational EBIT growth, minimum 15% ROCE and net debt to operational EBITDA between 2-3x – remain unchanged.

As an update to its ownership and capital allocation philosophy, Boreo plans to achieve its profit growth targets and the minimum ROCE of 15% using the following playbook:

• Acquisition of great entrepreneurial companies with the ability to generate sustainable earnings growth, strong cash flows and high return on capital,
• Investments in the growth of the companies which already exceed the 50% ROTWC target and can grow with an attractive return profile, and
• Carrying out short- to medium-term transformation and reorganization programs in companies operating below the 50% ROTWC-threshold.

In case companies do not demonstrate their ability to achieve the targets by 2026-2027, Boreo is prepared to consider structural actions for the companies.

‘The now communicated update to our ownership philosophy and our strategy to steer the group towards our long-term targets, is an important refinement of our thinking about responsible long-term ownership and capital allocation. We view high margins and returns on capital as a necessity in building a decentralized owner and acquirer of entrepreneurial companies and are committed to take firm action to improve the quality of the firm. Many of our companies already meet our targets and with decisive implementation of needed actions in companies below target levels, the returns of the Group can be improved significantly. We are convinced of both the long-term value creation potential of our business model and our ability to develop the company towards our goals even in a more challenging market environment’, says Boreo CEO Kari Nerg.

Vantaa, 29 February 2024

Boreo Plc

Kari Nerg

CEO

Distribution:
NASDAQ Helsinki Ltd
Principal media

www.boreo.com

For more information:

CEO Kari Nerg

+358 44 341 8514

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.