Broad market recovery. Allgon growing for the future.
Publish Date: 25 February, 2021 08:30
- Sales totalled SEK 115.1 million, which was 3 percent lower than the same period of the previous year.
- EBTIDA for the quarter was SEK 26.0 million, which was 27 percent better than the same period of the previous year. Allgon is demonstrating its strength in sales, support and the flexibility of digital tools.
- Allgon is increasing the emphasis on its core operations and established new businesses in the US and Germany. Allgon has taken steps to complete the streamlining of its business by selling the Smarteq subsidiary.
- In the first quarter of 2021 investment company Bure became the principal owner of Allgon.
Fourth quarter of 2020
- Net sales totalled SEK 115.1 (119.0) million, a decrease of 3.3 percent compared with the corresponding quarter of the previous year.
- EBITDA in the quarter amounted to SEK 26.0 (20.4) million, representing an EBITDA margin of 22.6 (17.2) percent.
- Operating profit amounted to SEK 19.5 (10.0) million, corresponding to an operating margin of 17.0 (8.4) percent.
- Earnings for the quarter amounted to SEK 8.3 (16.7) million, resulting in earnings per share of SEK 0.15 (0.30).
- Profit for the quarter from discontinued operations amounted to SEK -1.2 (-2.0) million.
- Cash flow from operating activities was SEK 13.6 (17.2) million.
January to December 2020
- Net sales totalled SEK 443.2 (474.1) million, a decrease of 6.5 percent compared with the previous year.
- EBITDA in the period amounted to SEK 86.6 (89.5) million, corresponding to an EBITDA margin of 19.6 (18.9) percent.
- Operating profit amounted to SEK 31.4 (61.9) million, equating to an operating margin of 7.1 (13.1) percent.
- Earnings for the period amounted to SEK –9.2 (44.6) million, resulting in earnings per share of SEK –0.16 (0.79).
- Profit for the period from discontinued operations amounted to SEK -23.7 (2.2) million.
- Cash flow from operating activities was SEK 35.6 (67.6) million.
- The Board of Directors proposes that no dividend be paid for the 2020 financial year.
Broad market recovery. Allgon growing for the future.
Industry is continuing to ramp up. Allgon is seeing this through increased demand and greater customer activity. We are gradually approaching the high levels of the previous year. But we remain vigilant and ready for changes in market conditions Our marked recovery is based on strong, longstanding customer relationships, flexible working methods and more digital tools. Based on this experience, we are continuing to develop for the future.
Industries worldwide have adapted and are increasingly recovering. We are seeing this reflected in greater interest in complex deals and stronger demand. Our radio control products help make industry’s machinery, technology and cranes more efficient.
By the third quarter our core business, radio control, had made a marked recovery and was only 6 percent lower than the previous year’s levels. This difference was cut to 3 percent in the fourth quarter. Sales for December were completely level with the same period of the previous year. This means we can look ahead with confidence and resilience. We now expect industry to continue to return to normal levels, with a full recovery anticipated by the fourth quarter of 2021. I’m also impressed by the performance of our subsidiaries Tele Radio and Åkerströms, which are only six months behind schedule. We have taken new market share and expanded the business further, putting us in a strong position following the global lockdown.
Industry looking ahead
By October our industrial customers were back in countries such as Finland, Norway, the Netherlands, Turkey and Poland. And by the end of November, Sweden and Germany were also back at 2019 levels, despite a number of lockdowns in Germany. The countries furthest behind in the recovery are those in Eastern Europe and Russia. The UK will also take some time. We are seeing more of a slowdown on newer and smaller markets where we have fewer established customer relationships.
We have gained new customers in the logistics sector. This is as a result of the growth in online retail over the past year, increasing pressure on Europe’s biggest logistics companies, which are expanding automation.
In the transport sector, an international truckmaker has ordered radio control for its vehicles to allow drivers to control trucks remotely in particularly hazardous or challenging environments. This technology is now available in trucks in several European countries.
Adaptation is our hallmark
The past year’s experience of a high degree of flexibility is influencing the way we develop our servicing, sales and deliveries. Over the year, Allgon has demonstrated that it can cope with the unexpected and the entire Group has adapted well.
Digital tools are a significant growth area in industry. Customers that previously depended entirely on physical servicing have switched to more digital channels. This is a major change and a more significant improvement than many have realised. Customers are demanding more speed, precision and control. This is where our digital expertise has come into its own, and it’s an advantage that we aim to continue developing.
Allgon also sees further opportunities for consolidation of the global radio control market. The sector currently consists of around 35 companies. Many of these companies are family owned, which is why there haven’t been many mergers in the sector. With its strong reputation, working methods and its objectives, Allgon is well positioned to drive consolidation in the longer term.
Despite the pandemic, we have intensified our research and development to ensure that, together with our customers, we are best positioned when economies reopen.
More industrial companies want to develop and integrate a number of digital formats to gain a better overview and planning of their business. This involves new platforms, effective services and data analysis. 5G may also be beneficial in this regard. Our main technology remains our established radio control products, which offer unrivalled quality and security.
There is significant interest in our new services that identify users and also document control in order to reduce wear and tear, interruptions and costs to aid efficiency and profitability. There is particular interest among heavy industry, nuclear energy, steel production, biochemistry and hydropower.
Having our own production in China and Vietnam is key to the reliability of our business operations. As the supply of components and shipping remains inconsistent, we have carefully adapted technology, production and stock to avoid delays. We have also increased the rate at which we update technology, future-proofing our products. We are monitoring the development of the global semiconductor shortage, which we are prepared for. This shortage could, however, affect the rate of recovery of the entire sector.
Expansion in multiple stages
Our expansion became more significant six years ago. We are now ramping up, with two new countries a year, and are established in 19 countries. Last year we moved into the US and Germany and opened a new subsidiary in India. And we are planning to expand further in 2021.
The bulk of our growth comes through our customers in countries where we are already established. Stage two sees us growing with the same customers in new countries. Stage three will see us working with new customers and sectors in new countries.
Opening offices in established markets is testament that the outlook for our industrial radio control systems is strong. We are then growing with the same customers and expanding into entirely new countries, such as Brazil, Russia and, just recently, India.
Our establishment of new subsidiaries can be described in two phases. Our first intermediate goal is to break even and then to pay ‘dividends’ to our parent company. The most recent new subsidiary to break even is in Brazil, which achieved this in the fourth quarter of 2020. The next phase of new subsidiaries can be seen in our Poland-based business. After three years, the parent company will receive the first dividend payment from its investment.
Bure becomes new principal owner
In the first quarter of 2021 investment company Bure became the principal owner of Allgon. Bure’s plan is to develop the company further within its own Group, and it is therefore delisting Allgon from the stock exchange. Henceforth Allgon’s performance can be tracked as part of the Bure Group. I would therefore like to take the opportunity to thank all the shareholders who have patiently owned Allgon shares as over the years we have acquired, streamlined and gradually built a new, stronger Allgon.
Finally, both our customers and Allgon have demonstrated considerable strength at various stages of the past year. I am extremely grateful for the efforts of our employees, who adapted and created new ways for us to serve our customers. Our products and services are being used more and more widely in industry. We have helped ensure industrial capacity and developed new products, services and servicing for an increasingly digital world. And we have expanded in both mature and new markets. In other words, we are well prepared for society to reopen and for the global economy to resume its progress.
Johan Hårdén, CEO & President, Allgon
Stockholm, 25 February
The complete report can be downloaded at https://allgon.se/en/investors/reports/