Press release
22 July 2020, 08:00
Sdiptech AB (publ) publishes interim report for the second quarter (April - June) 2020
The report will be available on the company's website: www.sdiptech.se
CONTINUED STRONG DEVELOPMENT AND STABLE MARKET SITUATION IN THE INFRASTRUCTURE SECTOR
APRIL – JUNE 2020
- Operating profit EBITA* increased by 31.5% compared to the previous year to SEK 82.6 million (62.8), corresponding to an EBITA* margin of 17.1% (14.0). The organic EBITA* growth for the Group was 14.8% of which -1.0% related to currency effects.
- Net sales increased by 7.7% to SEK 483.4 million (448.7). For the Group, the organic growth was -1.7%. of which -0.7% related to currency effects.
- Profit after acquisition costs before financial items (EBIT) increased by 31.3% and amounted to SEK 78.0 million (59.4).
- The financial items were strongly affected by unrealised currency differences, mainly in GBP, and amounted to a total of SEK -28.9 million (-5.9) incl. interest and other financial items.
- Earnings after tax for the Group amounted to SEK 38.3 million (47.7), of which SEK 36.9 million (46.8) was attributable to the Parent Company’s shareholders.
- Cash flow from current operations amounted to SEK 163.6 million (63.0), corresponding to a cash conversion of 179.8% (78.2).
- Earnings per ordinary share (average number), less minority interests and dividends on preference shares amounted to SEK 1.07 (1.43). After dilution, earnings per shares amounted to SEK 1.07 (1.43).
- On June 5, Sdiptech acquired all shares in Oy Hilltip Ab and on June 30, all shares in Stockholmradio AB were acquired.
- Through a directed share issue on June 10, the Group has received SEK 353.0 million in equity, before issue costs.
FIRST SIX MONTHS 2020
- Operating profit EBITA* increased by 34.1% to SEK 153.5 million (114.5), corresponding to an EBITA* margin of 15.9% (13.1). Organic EBITA* growth for the Group was 14.7%, of which -0.3% from currency effects.
- Net sales increased by 11.1% to SEK 967.8 million (870.9). For the Group overall, the organic growth was -0.5% of which 0.0% from currency effects.
- Profit after acquisition costs before financial items (EBIT) increased by 61.0% and amounted to SEK 146.8 million (91.2).
- Earnings after tax for the Group amounted to SEK 90.2 million (68.0), of which SEK 88.9 m (66.1) was attributable to the Parent Company’s shareholders.
- Cash flow from current operations amounted to SEK 220.0 million (120.6), corresponding to a cash conversion of 128.6% (91.0).
- During the period January to June, two acquisitions were completed: Oy Hilltip Ab and Stockholmradio AB. In addition, a directed share issue was carried out.
- Earnings per ordinary share (average number), less minority interests and dividends on preference shares, amounted to SEK 2.67 (1.95). After dilution, earnings per shares amounted to SEK 2.65 (1.95).
COMMENT ON THE IMPACT OF COVID-19
Covid-19 has had a limited impact on Sdiptech's sales and earnings during the second quarter. Currently the Group delivers approximately 95% of planned orders. At the end of the period, 38 people of the Group’s 1,291 employees were furloughed due to covid-19 effects, of which 35 in the UK. During the second quarter, an average of 92 people was furloughed.
The result for the first half of the year includes a total of SEK 5.7 million in government support connected to covid-19, which was received during the second quarter.
COMMENTS BY THE CEO:
CONTINUED STRONG DEVELOPMENT AND STABLE MARKET SITUATION IN THE INFRASTRUCTURE SECTOR
Despite challenging circumstances, we can sum up a strong first half of 2020. Sdiptech's overall goal is to every year increase profit through both organic growth and acquisitions. During the first half of the year, EBITA* profit increased by a total of 34.1 percent, of which 15.0 percent was organically excluding currency. At the same time, the EBITA* margin strengthened by almost three percentage points to 15.9 (13.1) percent. Cash flow generation during the first half of the year was a good 129 (91) percent and earnings per share increased by SEK 2.65 (1.95).
THE QUARTER - Stable despite uncertainties in the world
In recent months, a lot in the world around us has revolved around the corona pandemic and its severe consequences for healthcare, society and the economy. However, covid-19 has had a limited effect on Sdiptech's operations, mainly due to our strong position within critical societal infrastructure, which is prioritized to maintain well-functioning societies. As previously announced, the Group's delivery against planned orders increased from 85 percent to 95 during the quarter, which means that despite the prevailing situation, we were able to deliver almost the same levels as last year, corresponding to an organic sales decrease of 1.7 percent. We have begun the catch up on delayed orders, and we estimate that some of the delays will be recovered in 2020 and some in 2021.
The organic EBITA* growth was a strong 15.8 percent excluding currency effects, which is thanks to a strengthening of margins through acquisitions and a continued good increase in sales in units with an extra attractive offers and scalable business models. During the second quarter, precautionary measures as a result of the pandemic also contributed. Our business model is robust even in poorer times, something that the pandemic can paradoxically confirm. Despite this, we started in an early stage to prepare for a potentially lower business volume and introduced cost savings at both company- and group level. As a result, government subsidies excluded, we showed a positive profitability during the quarter. We have partly found new cost-effective levels but contained investments in product development and organization have also contributed. However, these initiatives are long-term correct and will be resumed to be implemented during the second half of the year.
After a preventive inventory build-up of critical components during the first quarter, we were able to return to more normal levels in the second quarter with a cash generation of a high 179.8 percent (78.2). In total during the first half of the year, cash generation was 128.6 percent (91.0), a result of us structurally working to free capital in order to systematically support our acquisition-based business model.
ACQUISITIONS – We welcome two well-managed companies
During the quarter, we made the first acquisition of the year – and has thereby broken new ground in Finland. Oy Hilltip Ab is one of Europe's leading manufacturers of road maintenance equipment with a leading position in its niche for smaller vehicles.
In addition, we have acquired Stockholmradio AB, an additional acquisition to Storadio Aero AB. Stockholmradio handles Sweden's coastal radio and other critical radio-based services for shipping. Thus, Sdiptech is now responsible for high-frequency radio communication to both aviation and shipping, which we coordinate in one and the same communication center.
OUTLOOK – Well equipped for the second half of the year
The Group's margin has strengthening for quite some time now and continues to do so as a result of our focus on building strong market positions. This is particularly evident in Special Infrastructure Solutions, which together with additions from acquisitions has an underlying organic margin strengthening that remains positive. Therefore, we increase the guidance from 20–22 percent to 22–25 percent for the full year 2020.
There is still a great deal of uncertainty around exactly what consequences the pandemic will have on our society. Despite this, we are cautiously optimistic. Our focus on infrastructure and companies that contribute to creating more sustainable, efficient and safe societies gives us confidence. We have a strong belief in our business model and even though there are a lot of uncertainties, we stand by our goals for 2020 of being able to acquire SEK 90 million in added EBITA and to grow organically by 5–10 percent.
Our overall financial targets were set four years ago and have been updated to better reflect the development phase that the Group is currently in. The two existing goals of organic and acquired growth, together with the ambition of a reasonable and manageable indebtedness, are the most central in this respect.
In June, we carried out a directed share issue in our B share, which provided approximately SEK 350 million in additional growth capital for increased flexibility in our acquisition work. We are pleased that several of our existing institutional investors participated in the issue, and that we also were able to broaden the ownership base with several new long-term institutional owners.
Finally, I would also like to take the opportunity to extend an extra big thank you to all employees who have once again shown their ability to act quickly and flexibly in the face of new market situations. With great commitment, you have in a time of a lot of uncertainty contributed to a strong result for the first six months of the year.
Jakob Holm
President and CEO
For additional information, please contact:
Bengt Lejdström, CFO, +46 702 74 22 00, bengt.lejdstrom@sdiptech.com
My Lundberg, IR & PR Manager, +46 703 61 18 10, my.lundberg@sdiptech.com
Sdiptech's common share of series B share is traded under the short name SDIP B with ISIN code SE0003756758. Sdiptech AB's preferred shares are traded under the short name SDIP PREF with ISIN code SE0006758348. Sdiptech AB's Certified Adviser at Nasdaq First North Premier Growth Market is Erik Penser Bank, +468-463 83 00, certifiedadviser@penser.se. Further information is available on the company's website: www.sdiptech.se
Sdiptech AB is a technology group with a primary focus on infrastructure segments critical to well-functioning societies and to welfare, e.g. water & sanitation, power & energy, transportation, energy efficiency and air climate. As part of our offering in urban areas, we also provide niched technical services for buildings and real-estate such as renovation of elevators and roofs. The company has approximately SEK 2,000 million in sales and is based in Stockholm.
Sdiptech AB (publ) is required to disclose this information pursuant to EU Market Use Regulation 596/2014. The company is based in Stockholm. The information was provided by the above contact person for publication 22 July 2020 at 08:00 CEST.
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