Interim report January–June 2020

APRIL–JUNE 2020

  • Net sales increased by 23% to SEK 580.6 million (473.1). The increase is a result of the acquisitions of Flatfield and Bare Board Group. In USD, net sales increased 20%. Growth excluding acquisitions was -3%.
  • Order intake increased 8% to SEK 486.2 million (450.0). In USD, order intake increased 5%. Order intake was affected by the unusually strong order intake in the first quarter.
  • EBITA increased to SEK 50.6 million (37.3), representing an EBITA margin of 8.7% (7.9). SEK 9.1 million was charged to EBITA relating to transaction costs for Bare Board Group. Excluding transaction costs, EBITA amounted to SEK 59.7 million, corresponding to an EBITA margin of 10.3%.
  • Operating profit was SEK 48.1 million (35.7). Operating margin was 8.3% (7.5).
  • Profit after tax was SEK 20.4 million (23.5).
  • Earnings per share was SEK 1.12 (1.39).

JANUARY–JUNE 2020

  • Net sales increased by 16% to SEK 1,063.7 million (919.0). The increase is a result of the acquisitions of Flatfield and Bare Board Group. In USD, net sales increased 11%. Excluding the acquisitions, sales decreased 2%.
  • Order intake increased 18% to SEK 1,049.7 million (892.1). In USD, order intake increased 13%.
  • EBITA increased to SEK 88.4 million (77.9), representing an EBITA margin of 8.3% (8.5). SEK 14.9 million was charged to EBITA relating to transaction costs for Flatfield and Bare Board Group. Excluding transaction costs, EBITA amounted to SEK 103.3 million, corresponding to an EBITA margin of 9.7%.
  • Operating profit was SEK 85.1 million (75.1). Operating margin was 8.0% (8.2).
  • Profit after tax was SEK 60.8 million (58.2).
  • Earnings per share was SEK 3.46 (3.45).

SIGNIFICANT EVENTS DURING AND AFTER THE QUARTER

  • On 3 April, it was announced that Peter Kruk had been recruited to replace Hans Ståhl as President and CEO. Peter Kruk will take up his new duties at the beginning of October.
  • On 24 April, 100 per cent of shares in Bare Board Group in Largo, USA were acquired. In conjunction with the acquisition, an additional bank loan of SEK 132.5 million was raised and the overdraft facility was extended by another SEK 50 million.
  • On 24 April, a directed share issue of 1,850,000 shares at SEK 155/share was completed.
  • The Annual General Meeting was held on 5 June 2020. The Meeting resolved in accordance with the Board of Directors’ proposal not to pay a dividend.
  • The Corona pandemic has had an adverse impact on order intake and net sales during the quarter and it is still difficult to judge the impact for rest of 2020. The economic effects vary greatly between different markets and customer segments and demand will probably remain weak for rest of 2020.

MESSAGE FROM THE CEO

Strong earnings despite the crisis

The second quarter of 2020 has been special for everyone, also for us at NCAB.

In conjunction with the coronavirus outbreak in China in early 2020, many factories in China closed for four weeks in connection with the Chinese New Year. We worked intensively to ensure that our customers received their deliveries. We also saw a large build up in the backlog of orders when order intake increased by 27 per cent in first quarter year-on-year. As we wrote in the interim report, this was one way our customers endeavored to ensure deliveries in the future.

The pandemic spread to the rest of the world in the second quarter. Many countries were partially or entirely in lockdown in April and May. We can see that countries in southern Europe and the UK were hardest hit among our operations.

Our company in the UK was seriously affected by weaker sales to a customer in the transport industry. Development in our Germany operation has remained strong, together with Nordic, China and the USA. An increase in demand was noted in a number of countries in the areas of MedTech and the electrification of the automotive industry. Our deliveries to 5G-projects in China are increasing. It is gratifying that we are now emerging from our transitional phase in the USA and can see sales growth in our existing operations and good contributions from the acquisitions of Altus and Bare Board Group (BBG).

Following the strong order intake in the first quarter, we have now seen a decline in the second quarter, though order intake for the first half of the year is in parity with net sales, meaning a book to bill of 1,0. Net sales for the quarter fell by 3 per cent excluding acquisitions, though this is still an acceptable level given the lockdowns and continued unstable market in several countries. Earnings were highly favorable, noting an increase of 40 per cent excluding acquisitions. Our business model, entailing that we do not own factories and keep minimal inventory, is particularly appropriate in times such as these. I am proud of our employees and their excellent handling of the situation. The good results are derived from our work close to customers in new and existing projects, at the same time as we have reduced costs and, in a few countries, could benefit of government support measures.

Which of these trends are sustainable? NCAB has gained a greater geographical coverage and reach, meaning that some regions can offer support when others are struggling. The same is true of our dependence on different sectors or customers. Our diversification balances our business. Our acquisitions made positive contributions and can only improve as we begin to benefit from the synergies. The strong earnings are also partly due to cost reductions for travel, conferences and trade fairs – activities that we will resume when things return to normal. Coming quarters are still uncertain, but to sum up, NCAB has an ability to deliver positive results even in times of uncertainty, but we will in the future again invest in growth and keep a stable level of earnings in line with our established targets.

On a personal level, I would like to express my gratitude to our dedicated employees and the Board of Directors, as well as for the trust shown by our interested shareholders. This is my last interim report as CEO of NCAB. My successor, Peter Kruk, will begin in October and we wish him very welcome.

Hans Ståhl
CEO and President, NCAB Group AB