Alimak Group AB (publ) (ALIG) Earnings Call Transcript & Summary

Welcome to the Alimak Group Annual General Meeting 2020 and the CEO Presentation. It's not at all the kind of annual general meeting that, I guess, we all would have expected to participate in. But given the circumstances and the situation around the world, and when you cannot come to us, then we are coming to you. So I will make my presentation on this video. And hopefully, you can take some pleasure it -- viewing it together with me. Taking then an elevated view on the full year 2019, there were 3 trends that characterized the year. Those were a weaker market for Construction Equipment on the order intake side. We saw quite some changed market conditions for Wind tower internals that also led to the closure of the factory in Tianjin in China last December. While we saw good growth for After Sales, very much driven by Wind and BMU side of the business. Despite the lower orders for Construction Equipment, they still managed to do all-time high from a revenue point of view. And they did so, together with the business area Rental and business area After Sales. So a big hand to the BAs for that achievement. Very pleased with that. We also made progress in other important areas throughout the operations, but that still did not get us to the target that we had set for the run rate on EBITA margin for Q4. We had a target of 15% for the quarter, and we ended up on 13.2%. And I think it goes without saying that, that part of the story was a bit disappointing, to put it that way. We ended up on the order side in 2019 slightly lower than what we had in our targets for orders. And that also translated into lower backlog that we entered into 2020 with. And when you combine that with the outbreak of the COVID-19 virus, I've also been open that first half of 2020 will be a challenging half year, but I do expect that business will strengthen in the second half of the year. Still, given where we are with the situation in nearly all markets currently, we do have a leading market position. We have a global footprint that none of our competitors can actually show something near. And I think that also creates a solid foundation for the future growth. And when you combine that with the strong financial position of the group, I think we should be in a pole position in order to take a lion's share of the market going forward. Looking then at the full year 2019 financial numbers, starting with order intake. We ended the order side on SEK 4.36 billion, and that is an organic decrease of 10% mainly coming from Construction as well as tower internals on the Wind side. While revenue-wise, we ended up at close to SEK 4.6 billion, and that left us with an organic increase of 2%. EBITA adjusted increased to SEK 629 million and -- with an EBITA adjusted margin of 13.7%, and that was up 0.9% from previous year. And still, even if I would have liked to see a higher margin, the increase from SEK 555 million the year before still count, I would say. Leverage-wise, meaning net debt ratio to EBITA end of the year was at 1.33 versus last year, 1.55. And we have a revised proposal from the Board of Directors for a dividend of SEK 1.75 per share. Number of employees at year-end was sitting around 2,300. Looking at 2019 revenue and profitability per business area, starting with the revenue for the full year 2019. There has not been too big changes on that. 2 percentage has moved from Industrial Equipment over to Construction Equipment and Rental with 1% each. While looking at EBITA adjusted, there are some larger changes. Industrial Equipment has moved from previous year, 13% to 17% of the total EBITA adjusted for 2019. And After Sales has then come down from previous year, 58% to the 2019 number of 53%. So those were the main changes then -- split between the business areas for 2019. So what are then the 2020 focus areas? We have divided those areas into 3 sort of main pillars, being market expansion, After Sales growth and optimized operations. Market expansions. It's all about moving into new markets with extended or new portfolio of products, covering partly also new applications. Adding to that, also new services coming out of the After Sales activities. And on top of that, still executing on an acquisition agenda. After Sales growth, it's all about service penetration, continued focus on BMU installed base. We know there are huge number of installed units out there that is well mature for being either replaced or upgraded. And also increased utilization within After Sales by implementing new field service management system that will give us a much better view of the assets sitting on the customers' side. Third one, optimized operations. Common platform that certainly goes for our BMU design, we come with 2 brands. We are developing a common platform for that. Already touched upon field service management system that we will roll out to be a global solution. And on top of that, we have done our first ERP system implementation in Sweden, and we will also continue to roll that out to other countries. It also will cover a streamlining of the organization, both in terms of operational excellence as well as finalizing the legal structure that we have been working on now since the large acquisitions in 2016. It goes without saying that we had a challenging start of 2020. Quarter 1 was heavily impacted, both on the Construction side as well as on the Industrial Equipment side in terms of interruptions on the supply chain part. But also on our own production output, production facilities being closed due to coronavirus outbreak and the safety precautions that were put in place in different countries. While on the After Sales side and on the Rental side, we saw customers putting in place restrictions for access of third-party people. And that also hit our activities out at the customers' side. So all in all, I have to say that on the output side, it was a very challenging Q1. On the order intake side, I still have to say that what we saw was a stable order intake with continued growth for After Sales. And I'm also very happy to see the sequential improvements that came in Construction Equipment and maybe, in particular, from markets that we have said now for quite some time that we would expect a pickup when things like the Brexit was over and done with, and also for the Nordics that we expected those markets to come back. And I'm pleased to see that, that also happened in quarter 1. On the financial side, we maintained a strong financial position. We also had a positive cash flow from the operations during the quarter. So all in all, I think if someone is fit for -- going through a period like this, I think we are definitely the one that are also expecting to come out well on the other side. Also bearing in mind that there are further measures to put in place when that is deemed absolutely necessary. Looking then at our midterm financial targets, and starting with our revenue growth target, which is 6% organic revenue growth as an average. And we came from 9% growth in 2017 to a flat 2018, and now 2% in 2019. So obviously, there is more to do on that side. EBITA margin target. We have a target to reach an operating EBITA margin of at least 15%. And I've already touched upon the fact that we had a target of a run rate in Q4 2019 at 15%. We did not reach that one. Still, we went from 12.8% in 2018 to 13.7% in 2019. So we are getting closer. But there is still a gap there of 1.3%, so that certainly also needs to be worked on. Leverage target or net debt-over-EBITDA ratio, that's a target of 2x. And at year-end 2019, we were at 1.33. So we are at least on the right side of that one. Looking at the full year performance for the years 2008 up to 2019. Quite some pleasure to see that, first of all, the company has made a profit in all those 12 years, even during the financial crisis years of 2008, 2009 and probably even in 2010 for certain regions. Then we went public, we got listed in 2015. We ended up with a revenue for that year just north of SEK 2 billion with an EBITA adjusted margin of SEK 350 million. Then we had the following year, in 2016, nearly the same revenue level while the EBITA adjusted dropped down to SEK 331 million. We made 2 large acquisitions at the back end of 2016 that were closed in 2017, taking the revenue number up to SEK 4 billion with an EBITA adjusted at SEK 510 million. And the following year, we ended up on an EBITA level of SEK 555 million level, with last year 2019 coming in at SEK 629 million. We knew that the EBITA adjusted margin would be somehow diluted, taking on businesses with significantly lower margins that we were coming in with from Alimak Group. So that was quite clear. But looking at the picture, I'm still quite proud of what has been achieved. But satisfied, of course, you are never satisfied. You always want to do better, both on top line as well as on bottom line. We have defined our ways of operating into sort of 3 main focal elements, and it all starts with safety. So safety comes first. Every day around the globe, we are either operating equipment or we are transporting thousands of people. So it goes without saying that safety of the people is our absolute highest priority. We consider ourselves being a global leader in safety within all the segments we are operating. And again, keeping customers, own personnel, people on the ground, keep them safe at all times of operation of our equipment is priority #1. Our customers means everything to us. Customers are at the center of our organization, and it is only their satisfaction that is really defining our success. And it is only -- it's also the only way that our success can be sustained going forward. The third focal point is our aim or our ambition to act as one company. We are a global company, still with local operations. Our combined operations and our solutions, we believe those are providing the best value for our customers. So acting and coming across as one company is very important to the group. Our ways of operating builds on 4 core values: collaboration, integrity, respect and innovation. Collaboration means simply that we collaborate, both internally as well as externally with all of Alimak Group's stakeholders. We trust, we share know-how and we do support each other. We work together using the whole group to achieve the success that we are aiming for. Integrity. We follow rules, codes and local regulations in all geographies that we are operating. We are open and honest in dealing with each other, whether that is internally or externally. We speak out when something is wrong and we do take responsibility for the consequences of our actions. Respect means that we treat everyone with fairness, with dignity and respect. We value diversity, we value talent, different ideas and perspectives. And we deliver on what we promised. Innovation. We are the thought leaders in our segments for solutions, improving safety, productivity, the environment and the society. We use customer value to prioritize the efforts that we're putting into our products and solutions and services. We encourage all employees to improve our offers, our processes and the interaction with customers as well as our suppliers. This slide goes back to 2015 and -- when we did the IPO and the listing on the stock exchange in Stockholm. And I believe this slide is as valid today as it was back in 2015. It is listing a number of good reasons why we believe that Alimak Group is a good investment case. And starting on the first one, we're saying that strong global market position and the brands that belongs to the group is certainly as valid today as it was back then. Since then, or since 2015, we've added brands with Avanti and CoxGomyl and Manntech. So I think we have just expanded on that one. So I think we are stronger than ever before, and I do not really see any reason why we should stop here. So I think this is as valid going forward. We believe that we have an attractive business model with very resilient aftermarket revenues. And although this has been slightly tested out during the corona crisis, I should still say that during a normal market situation, this is absolutely valid. And I think we've proven also that during 2019, seeing how After Sales again has been growing their business within the Wind and the BMU areas, where there is also, for the future, a lot to harvest. Strong international platform, both in emerging markets as well as in developed or mature markets. Yes, we have also -- with the acquisitions, we have strengthened our footprint. So I think this one is even stronger today as it was back in 2015. And the next one, a strong financial position. Yes, absolutely. I think we are delivering solid numbers. Although we don't always reach quite up to our ambition levels and the targets that we have set, I think it's still a company that has a solid financial position. And the last one, being well positioned to capture growth from trends that are valid now and going forward as well as from our own growth initiatives. Whether that be on the services side or on the portfolio side, product portfolio side, that is definitely also valid as of today. So I think these points for the investment case in Alimak Group is absolutely valid also in 2020. So this concludes my presentation. And it reminds for me to say a big thank you, first of all, for all of you that listened in and looked at the presentation. I'm very pleased with that. And I would also like to say a big thank you to all our employees who have worked hard to provide the results that we are delivering. And also to the management team who are doing the same. This is a teamwork. This is not a one-person exercise, that is absolutely for sure. And behind it, there is a good and strong management team. I would also like to say thank you to the Board for all the support that they have given the group, that they have given to me. And also to the investor community that we have the pleasure to meet every now and then, maybe in particular, related to the quarterly reports. And again, a big hand to all of you that have been out there supporting Alimak Group and also supporting me. So by that, thanks a lot.