Quarterly Report • Jul 23, 2020
Quarterly Report
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INTERIM REPORT Q2/2020
TECHNOLOGY INNOVATION SUSTAINABILITY
Business risks, accounting principles and other information
Financial statements Parent
Alternative Performance Measures reconciliation Graph data summary
Unless otherwise stated, all amounts have been stated in SEK million. Certain financial data has been rounded in this Interim Report. Where the sign "−" has been used, this either means that no number exists or the number rounds to zero. This english version of the Interim Report is a translation of the Swedish original. If there are any differences the latter shall prevail.
MSEK 342 (553) – sales were down –38% y-o-y. There is no currency impact on sales in the quarter.
Operating income was MSEK 28 (121). A restructuring charge of MSEK 20 was taken in the quarter. Excluding this, operating income before items affecting comparability was MSEK 48 (121), generating an operating margin before items affecting comparability of 14.2% (21.9).
MSEK 17 (92); basic EPS of SEK 0.44 (2.39).
MSEK 87 (128); cash generation affected by lower sales and working capital unwind.
MSEK 798 (1,119) – sales were down –29% y-o-y. After adjusting for impact of currency (+1%), sales in constant currency were down –30%.
MSEK 115 (247), generating an operating margin before items affecting comparability of 17.0% (22.0).
MSEK 77 (186); basic EPS of SEK 2.04 (4.82).
MSEK 168 (230); cash generation affected by lower sales.
MSEK –67 (102); gearing ratio of –6% (10).
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||||
|---|---|---|---|---|---|---|---|---|
| Amounts in MSEK | 2020 | 2019 | Change | 2020 | 2019 | Change | 2019/20 | 2019 |
| Net sales | 342 | 553 | –38% | 798 | 1,119 | –29% | 1,691 | 2,012 |
| Operating income before items affecting comparability | 48 | 121 | –60% | 135 | 247 | –45% | 360 | 472 |
| Operating income | 28 | 121 | –77% | 115 | 247 | –53% | 340 | 472 |
| Earnings before tax | 23 | 119 | –81% | 103 | 240 | –57% | 316 | 453 |
| Net income for the period | 17 | 92 | –82% | 77 | 186 | –59% | 212 | 321 |
| Cash flow from operating activities | 87 | 128 | –32% | 168 | 230 | –27% | 324 | 386 |
| Net debt 2) | –67 | 102 | –166% | –67 | 102 | –166% | –67 | 54 |
| Operating margin before items affecting comparability, % | 14.2 | 21.9 | –7.7 | 17.0 | 22.0 | –5.0 | 21.3 | 23.5 |
| Operating margin, % | 8.3 | 21.9 | –13.6 | 14.5 | 22.0 | –7.5 | 20.2 | 23.5 |
| Basic EPS before items affecting comparability, SEK | 0.84 | 2.39 | –1.55 | 2.44 | 4.82 | –2.38 | 5.99 | 8.37 |
| Basic EPS, SEK | 0.44 | 2.39 | –1.95 | 2.04 | 4.82 | –2.78 | 5.59 | 8.37 |
| Diluted EPS, SEK | 0.44 | 2.36 | –1.92 | 2.04 | 4.79 | –2.75 | 5.59 | 8.27 |
| Return on equity, % | 18.7 | 39.0 | –20.3 | 18.7 | 39.0 | –20.3 | 18.7 | 29.5 |
| Gearing ratio, % | –6 | 10 | –16 | –6 | 10 | –16 | –6 | 5 |
1) For additional information see pages 30–31 and 33.
2) For additional information see page 14.
President and CEO, David Woolley, comments on the Q2 2020 Interim Report.
The quarterly published market indices suggest production rates, blended for the Group's end-markets and regions, declined by –58% with both the Americas and Europe & RoW reporting negative growth for the fourth successive quarter. The Group's reported sales continued to be affected by the overall market slowdown and the effects of the global pandemic COVID-19, with sales down –38% year-on-year for the second quarter and –29% for the first six months of the year. The same market indices indicate every geographic region and every end market application was weaker year-on-year during the second quarter. No sector in this industry was immune from the global pandemic with most end market applications down by between 70–85%.
Constant currency sales in Europe and Rest of World were down −42% whilst the Americas were −28% year-on-year for the second quarter and the disparity between the two geographical regions is explained by two factors. Firstly, the timing of when COVID-19 impacted the regions, Europe early in the second quarter then latterly the US. Secondly, key US customers were deemed essential suppliers by the US government and were encouraged to continue to manufacture construction & agricultural machinery, softening the sales impact to our US hydraulic product group.
Sales to all end-market applications were lower in the second quarter year-on-year with the truck & off-highway sectors, agricultural machinery & construction equipment particularly affected in our core regions of North America and Europe.
The effects of the pandemic, COVID-19, started to materially impact our business in late March with many of our European & Asian OEM customers forced to cease production as national governments imposed restrictions to limit the spread of the virus. Concentric reacted quickly to the changes in customer demand reducing our cost of capacity by introducing short-time working arrangements in many of our facilities, furloughing employees or extending plant shutdowns. Concentric also accessed government employee support programs in Sweden, Germany and the UK with grant income from these schemes amounting to MSEK 8 during the quarter. The new US pay-check protection program was also utilised with loans of MSEK 10 received during the quarter. Concentric will seek loan forgiveness from the US government during the second half of this year, converting the loan to grant income.
Concentric Business Excellence has been key in our ability to adapt operations to lower demand and thereby defend our margins. All parts of the business participate in this programme, driving continuous improvement in customer service levels, employee motivation and operational excellence. This program and our employee's resilience and ability to adapt to an ever changing environment has ensured the operating margin was maintained at good levels despite a −38% reduction in sales. The year-on-year profit drop-out rate was limited to 35% and the operating margin before items affecting comparability for the second quarter was 14.2% (21.9).
Managing the liquidity of the business has been a critical activity this quarter ensuring only essential capital projects are approved, controlling inventory levels and ensuring customers continue to pay to terms. Operating cash flow for the period was MSEK 87 with an operating income to operating cash conversion ratio of 181%, the quarter benefitting from a working capital unwind. Cash and cash equivalents increased during the quarter by MSEK 49 to MSEK 631, and with no external bank debt we are confident Concentric has sufficient cash to meet our operational needs.
We are proud of our performance during this most difficult of trading quarters and all has been achieved through the support and understanding of our employees.
Clearly in the short term we are managing the business during an economic slowdown, compounded by the global pandemic. However, the Concentric team has a clear focus on the long term strategic opportunities which CO2 neutral transportation and energy generation presents. During the second quarter we made four important press releases which continue to demonstrate we are winning new business with both e-pumps and conventional technology which enables our customers to reduce fuel consumption and CO2 emissions:
These new contracts further demonstrate that Concentric is able to win new business in the strategically important e-pump sector and is actively participating in developing new technology to substantially increase fuel efficiency of class 8 trucks as part of the US Super Truck program. The new patented DCC is proven to have significant benefits in long haul truck applications, reducing fuel consumption and more importantly reducing CO2 emissions.
The global economy and demand from our customers has been affected by the pandemic. It remains too early to know what profile an economic recovery may take, but it looks certain customer demand will be lower post the pandemic for some time. To reduce our cost of capacity to meet the medium term demand from our customers we have implemented a headcount restructuring program which will be completed during the third quarter. The cost of this program has been calculated to be MSEK 20 and expensed in Q2.
The overall published market indices blended to Concentric's mix of end market applications and locations suggest the overall market will recover during the third quarter of 2020, but the recovery is not uniform across geographies or end market applications. We expect demand for medium- and heavy-duty trucks in Europe to recover ahead of North America but demand from the off-highway sectors, agricultural machinery and construction equipment, will remain suppressed.
Therefore the global pandemic will affect our business for an indefinite period of time. Demand for our engine products has improved
» We are proud of our performance during this most difficult of trading quarters and all has been achieved through the support and understanding of our employees. «
slightly through the second quarter and we expect this uncertainty to last for the rest of the year. As an example; the demand for hydraulic products has weakened particularly in the North American market, and level of orders received in the second quarter indicate that sales in the third quarter 2020 will be similar to sales in the second quarter. However, whilst visibility has improved somewhat, uncertainty in the market place is high and is expected to influence sales indefinitely in the nearby future.
Restructuring the cost of capacity during the coming quarter to right size the business to address medium term customer demand will be a key activity, whilst ensuring we maintain core skills within the business to support future growth and the ability to develop new technologies.
The financial position of Concentric remains strong, both capital structure and liquidity and Concentric remains committed to meeting our customers' requirements.
Following on from the successful nomination announced in November 2017 for the 24V electric oil pump with ZF, Concentric AB has extended its partnership with this global leader in driveline and chassis technology to develop a new electric oil pump suitable also for 12V supply. As with the 24V electric oil pump, the 12V version has the following key benefits:
Concentric AB has been awarded a contract to supply its new Dual Cone Clutch (DCC) to a Tier 1 brake air compressor manufacturer for use in on-highway applications with one of the world's leading OEM's of trucks, buses, construction equipment and industrial engines. Production will start in 2022, with projected total revenues through to the end of 2026 estimated to amount to SEK 60 million.
Significant benefits have been identified for long haul truck applications, where the DCC enables the brake air compressor to be switched off for more than 80% of the running time, reducing fuel consumption and more importantly, reducing CO2 emissions. The clutch is integrated within the brake air compressor housing to minimise packaging space, reducing weight and also noise emissions.
Concentric AB is working with several major OEM's for the US Super-Truck II initiative. This is the second phase of the US Department of Energy (DoE) sponsored project to develop and demonstrate cost-effective advanced technologies that show a substantial increase in fuel efficiency of Class 8 trucks.
These diverse projects are all aimed towards improving fuel savings and reducing CO2 emissions through more efficient fluid control, featuring various new pump technologies for heavy-duty applications in the US truck market, including:
After announcing last year Concentric AB had successfully won five electro-hydraulic steering systems contracts worth an estimated total of EUR 9 million (SEK 94 million),Concentric AB has been awarded a further new contract to supply another global OEM producer of electric trucks and buses with the second generation EHS system. The updated system continues to offer the same long life durability whilst increasing the levels of control and intelligence, providing greater value to our customers. This new contract for European municipal vehicles is estimated to be worth EUR 7 million (SEK 67 million) over the next five years.
As the world shifts toward CO2 neutrality, especially in inner cities, the design of our EHS system continues to evolve at a similar pace. Our product and design engineers are working closely with our key customers to meet and exceed all required critical safety standards. In EHS applications, Concentric AB has developed a robust and reliable system that can also reduce energy consumption by as much as 50% over conventional solutions.
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Amounts in MSEK | 2020 | 2019 | Change | 2020 | 2019 | Change | 2019/20 | 2019 | |
| Net sales | 342 | 553 | –38% | 798 | 1,119 | –29% | 1,691 | 2,012 | |
| Operating income before items affecting comparability | 48 | 121 | –60% | 135 | 247 | –45% | 360 | 472 | |
| Operating income | 28 | 121 | –77% | 115 | 247 | –53% | 340 | 472 | |
| Earnings before tax | 23 | 119 | –81% | 103 | 240 | –57% | 316 | 453 | |
| Net income for the period | 17 | 92 | –82% | 77 | 186 | –59% | 212 | 321 | |
| Operating margin before items affecting comparability, % | 14.2 | 21.9 | –7.7 | 17.0 | 22.0 | –5.0 | 21.3 | 23.5 | |
| Operating margin, % | 8.3 | 21.9 | –13.6 | 14.5 | 22.0 | –7.5 | 20.2 | 23.5 | |
| ROCE, % | 30.3 | 49.6 | –19.3 | 30.3 | 49.6 | –19.3 | 30.3 | 42.5 | |
| Return on equity, % | 18.7 | 39.0 | –20.3 | 18.7 | 39.0 | –20.3 | 18.7 | 29.5 | |
| Basic EPS before items affecting comparability, SEK | 0.84 | 2.39 | –1.55 | 2.44 | 4.82 | –2.38 | 5.99 | 8.37 | |
| Basic EPS, SEK | 0.44 | 2.39 | –1.95 | 2.04 | 4.82 | –2.78 | 5.59 | 8.37 | |
| Diluted EPS, SEK | 0.44 | 2.36 | –1.92 | 2.04 | 4.79 | –2.75 | 5.59 | 8.27 |
1) For additional information see pages 30–31 and 33.
Sales for the second quarter were down year-on-year by −38% with no impact from currency. As a result, sales for the first six months were down year-on-year by −30% after adjusting for the impact of currency (−1%). This reduction reflects the impact of COVID-19 across our Group. Europe & ROW has been hit harder of the two regions as COVID-19 affected the region earlier in the quarter with sales down year-on-year by −42% after adjusting for the impact of currency (+1%). Americas sales were down year-on-year −28% after adjusting for the impact of currency (−1%). Key US customers were deemed essential suppliers by the US government, softening the impact in the region.
Despite the −38% decline in sales, Concentric Business Excellence has managed to defend margins resulting in an operating income before items affecting comparability of MSEK 48 (121). Operating income margin before items affecting comparability for the second quarter and the first six months was 14.2% (21.9) and 17.0% (22.0) respectively. Operating income includes MSEK 20 of restructuring costs relating to the right sizing of the business, of which MSEK 19 relates to Europe & Row and MSEK 1 to Americas. Further details of this program can be
found in the CEO letter. Including these costs, operating margin was 8.3% (21.9) in the quarter and 14.5% (22.0) for the first six months.
Net financial expenses in the second quarter comprised of pension financial expenses of MSEK 3 (4) and other net interest expense of MSEK 1 (income 3). Accordingly, net financial expenses in the first six months comprised of pension financial expenses of MSEK 8 (8) and other net interest expenses of MSEK 1 (income 2).
The underlying effective tax rate for the second quarter and the first six months was 28% (23) and 25% (23) respectively. This rate largely reflected the mix of taxable earnings and tax rates applicable across the various tax jurisdictions.
The basic earnings per share for the first six months was SEK 2.04 (4.82), down SEK 2.78 per share. The diluted earnings per share for the first six months was SEK 2.04 (4.78), down SEK 2.74 per share.
FINANCIAL SUMMARY – GROUP
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||||
|---|---|---|---|---|---|---|---|---|
| Amounts in MSEK | 2020 | 2019 | Change | 2020 | 2019 | Change | 2019/20 | 2019 |
| External net sales | 172 | 237 | –27% | 360 | 481 | –25% | 742 | 863 |
| Operating income before items affecting comparability | 20 | 38 | –47% | 41 | 75 | –45% | 127 | 161 |
| Operating income | 19 | 38 | –50% | 40 | 75 | –47% | 126 | 161 |
| Operating margin before items affecting comparability, % | 11.2 | 15.8 | –4.6 | 11.3 | 15.5 | –4.2 | 17.1 | 18.7 |
| Operating margin, % | 10.6 | 15.8 | –5.2 | 11.0 | 15.5 | –4.5 | 17.0 | 18.7 |
| ROCE, % | 37.8 | 70.7 | –32.9 | 37.8 | 70.7 | –32.9 | 37.8 | 49.9 |
Sales for the second quarter were down year-on-year by −27%, after adjusting for the impact of currency (−1%), the sales were down −28%. As a result, sales for the first six months were down −25%, adjusting for the impact currency (−2%), the sales were down −27%. Sales were down across all end-market applications as a result of COVID-19. Key US customers were deemed essential suppliers by the US government and were encouraged to continue producing construction equipment and agricultural machinery, softening the impact on hydraulic product sales.
The operating margin before items affecting comparability in the second quarter was 11.2% (15.8) and 11.3% (15.5) for the first six months. The operating margin remains strong as a result of the Concentric Business Excellence program to adapt to lower demand. This has resulted in operating income before items affecting comparability of MSEK 20 (38) in the quarter.
Government support received from the Paycheck Protection Program does not impact operating income in the quarter. Forgiveness for the loans received will be sought in Q3.
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||||
|---|---|---|---|---|---|---|---|---|
| Amounts in MSEK | 2020 | 2019 | Change | 2020 | 2019 | Change | 2019/20 | 2019 |
| External net sales | 220 | 383 | –43% | 556 | 778 | –29% | 1,210 | 1,432 |
| Operating income before items affecting comparability | 30 | 84 | –64% | 98 | 174 | –44% | 241 | 317 |
| Operating income | 11 | 84 | –87% | 79 | 174 | –55% | 222 | 317 |
| Operating margin before items affecting comparability, % | 13.8 | 22.0 | –8.2 | 17.7 | 22.4 | –4.7 | 20.0 | 22.2 |
| Operating margin, % | 5.2 | 22.0 | –16.8 | 14.3 | 22.4 | –8.1 | 18.4 | 22.2 |
| ROCE, % | 28.4 | 41.0 | –12.6 | 28.4 | 41.0 | –12.6 | 28.4 | 40.6 |
Sales for the second quarter were down year-on-year by −43%, after adjusting for the impact of currency (+1%), the sales were down −42%. Sales for the first six months were down year-on-year by −29%, with no impact of currency. Sales in Europe this quarter were hit harder by COVID-19 as it impacted the region earlier in the quarter. Sales to the European truck sector were down much less than the market indices which showed that the market declined year-on-year by −81%.
second quarter was 13.8% (22.0) and 17.7% (22.4) for the first six months. As in Americas, through the Concentric Business Excellence program the business quickly adapted to changes in demand, protecting operating margins and achieving operating income before items affecting comparability of MSEK 30 (84).
Government support across the region contributed MSEK 8 to operating income in the quarter.
The operating margin before items affecting comparability in the
INTERIM REPORT Q2/2020
| Q2-20 vs Q2-19 | H1-20 vs. H1-19 | FY-20 vs. FY-19 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Americas Europe & RoW | Group | Americas | Europe & RoW | Group | Americas Europe & RoW | Group | |||
| Market – weighted average1) | −47% | −66% | −58% | −32% | −54% | −45% | −17% | −28% | −24% |
| Actual – constant currency 2) | −28% | −42% | −38% | −26% | −29% | −30% |
1) Based on latest market indices blended to Concentric's mix of end-markets and locations. 2)Based on actual sales in constant currency, including Alfdex.
Overall, market indices suggest production rates, blended to the Group's end-markets and regions, were down −58% year-on-year for the second quarter and −45% for the first six months of the year. The second quarters published market indices reported bigger market reductions in Europe & RoW than the Americas because Europe and Asia were impacted earlier in the quarter than North America by the global pandemic.
The current published forecast market indices for 2020 show the full
year forecast has deteriorated from a year-on-year reduction of −13% reported in Q1 2020 to −24%. This suggests there will be some form of a recovery during the second half of the year. However, the global pandemic has increased market uncertainty and reduced visibility meaning published forecasts for the balance of the year could change significantly over the course of the third quarter.
As noted in previous interim reports, movements in the market indices tend to lag the Group's order intake experience by 3–6 months.
| Q2-20 vs Q2-19 | H1-20 vs H1-19 | FY-20 vs FY-19 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| North America |
South America Europe |
India | China | North America |
South America Europe |
India | China | North America |
South America Europe |
India | China | ||||
| Agriculture Diesel engines |
−72% | −71% | −81% −68% −71% −51% | −49% | −67% | −44% | −49% | −6% | −5% | −38% | −2% | −10% | |||
| Construction Diesel engines |
−73% | −73% | −76% | −76% | −70% | −53% | −53% | −59% | −58% | −48% | −10% | −13% | −24% | −26% | −7% |
| Hydraulic equipment |
−5% | n/a | −2% | n/a | n/a | −5% | n/a | −6% | n/a | n/a | −3% | n/a | −3% | n/a | n/a |
| Trucks Light vehicles |
−74% | n/a | n/a | n/a | n/a | −55% | n/a | n/a | n/a | n/a | −14% | n/a | n/a | n/a | n/a |
| Medium and Heavy vehicles |
−85% | −79% | −81% | −85% | −70% | −74% | −63% | −67% | −73% | −47% | −50% | −31% | −38% | −52% | −7% |
| Industrial Other off-highway |
−74% | −73% | −77% | −73% | −69% | −54% | −53% | −60% | −53% | −45% | −12% | −12% | −26% | −18% | −3% |
| Hydraulic lift trucks |
−39% | n/a | −11% | n/a | n/a | −18% | n/a | −11% | n/a | n/a | −26% | n/a | −11% | n/a | n/a |
The market indices summarised in the table above reflect the Q2 2020 update of production volumes received from Power Systems Research, Off-Highway Research and the International Truck Association of lift trucks.
< −–10% −–10% to –1% 0% 1% to 10% > 10%
The reported cash inflow from operating activities for the second quarter amounted to MSEK 87 (128), which represents SEK 2.30 (3.32) per share. This takes the cash inflow from operating activities for the first six months to MSEK 168 (230), which represents SEK 4.45 (5.97) per share.
Total working capital at 30 June was MSEK −36 ( −20), which represented −2.2% (−0.9) of annual sales. Working capital decreased compared to 31 December 2019 as working capital unwound due to the lower sales.
The Group's net investments in tangible fixed assets amounted to MSEK 1 (4) for the second quarter and MSEK 4 (10) for the first six months.
Following a review of the actuarial assumptions used to value the Group's defined benefit pension plans, as last year there were no remeasurement gains or losses recognised in net pension liabilities during the first six months 2020.
Overall, the Group's net debt at 30 June decreased to MSEK −67 (102), comprising bank loans of MSEK 0 (177), loans related to leasing MSEK 88 (96) and net pension liabilities of MSEK 465 (506), net of cash amounting to MSEK 631 (677). Shareholders' equity amounted to MSEK 1,180 (1,065), resulting in a gearing ratio of −6% (10) at the end of the first six months.
FINANCIAL POSITION
Net debt and gearing
Unless otherwise stated, all amounts have been stated in SEK million ("MSEK"). Certain financial data has been rounded in this interim report. Where the sign "–" has been used, this either means that no number exists or the number has been rounded to zero.
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019/20 | 2019 | |
| Net sales | 342 | 553 | 798 | 1,119 | 1,691 | 2,012 |
| Cost of goods sold | –248 | –380 | –563 | –762 | –1,186 | –1,385 |
| Gross income | 94 | 173 | 235 | 357 | 505 | 627 |
| Selling expenses | –11 | –15 | –27 | –35 | –16 | –24 |
| Administrative expenses | –29 | –37 | –65 | –77 | –128 | –140 |
| Product development expenses | –9 | –13 | –20 | –26 | –40 | –46 |
| Share of net income in joint venture | 2 | 2 | 9 | 8 | 21 | 20 |
| Other operating income and expenses | –19 | 11 | –17 | 20 | –2 | 35 |
| Operating income | 28 | 121 | 115 | 247 | 340 | 472 |
| Financial income and expenses | –5 | –2 | –12 | –7 | –24 | –19 |
| Earnings before tax | 23 | 119 | 103 | 240 | 316 | 453 |
| Taxes | –6 | –27 | –26 | –54 | –104 | –132 |
| Net income for the period | 17 | 92 | 77 | 186 | 212 | 321 |
| Parent company shareholders | 17 | 92 | 77 | 186 | 212 | 321 |
| Non-controlling interest | – | – | – | – | – | – |
| Basic earnings per share before items affecting comparability, SEK | 0.84 | 2.39 | 2.44 | 4.82 | 5.99 | 8.37 |
| Basic earnings per share, SEK | 0.44 | 2.39 | 2.04 | 4.82 | 5.59 | 8.37 |
| Diluted earnings per share, SEK | 0.44 | 2.36 | 2.04 | 4.79 | 5.59 | 8.27 |
| Basic average number of shares (000) | 37,772 | 38,626 | 37,769 | 38,629 | 37,942 | 38,369 |
| Diluted average number of shares (000) | 37,772 | 39,107 | 37,769 | 38,939 | 37,944 | 38,849 |
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019/20 | 2019 | |
| Net income for the period | 17 | 92 | 77 | 186 | 212 | 321 |
| Other comprehensive income | ||||||
| Items that will not be reclassified to the income statement | ||||||
| Remeasurement gains of net pension liabilities | – | – | – | – | 75 | 75 |
| Tax on remeasurement gains of net pension liabilities | – | – | – | – | -13 | -13 |
| Remeasurement losses of net pension liabilities | – | – | – | – | –76 | –76 |
| Tax on remeasurement losses of net pension liabilities | – | – | – | – | 20 | 20 |
| Items that may be reclassified subsequently to the income statement | ||||||
| Exchange rate differences related to liabilities to foreign operations | 82 | –18 | 3 | –81 | –21 | –105 |
| Tax arising from exchange rate differences related to liabilities to foreign operations | –13 | –3 | –1 | 12 | 3 | 16 |
| Cash-flow hedging | – | –1 | –2 | 1 | –4 | –1 |
| Tax arising from cash-flow hedging | – | – | – | – | – | – |
| Foreign currency translation differences | –162 | 9 | –37 | 120 | – | 157 |
| Total other comprehensive income | –93 | –13 | –37 | 52 | –16 | 73 |
| Total comprehensive income | –76 | 79 | 40 | 238 | 196 | 394 |
| 30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 | |
|---|---|---|---|
| Goodwill | 634 | 642 | 656 |
| Other intangible fixed assets | 137 | 177 | 162 |
| Right of use fixed assets | 86 | 97 | 84 |
| Other tangible fixed assets | 84 | 104 | 98 |
| Share of net assets in joint venture | 64 | 44 | 55 |
| Deferred tax assets | 139 | 143 | 137 |
| Long-term receivables, joint ventures | 25 | – | – |
| Other long-term receivables | 4 | 6 | 6 |
| Total fixed assets | 1,173 | 1,213 | 1,198 |
| Inventories | 132 | 162 | 147 |
| Current receivables | 230 | 327 | 243 |
| Cash and cash equivalents | 631 | 677 | 531 |
| Total current assets | 993 | 1,166 | 921 |
| Total assets | 2,166 | 2,379 | 2,119 |
| Total Shareholders' equity | 1,181 | 1,065 | 1,136 |
| Pensions and similar obligations | 465 | 506 | 499 |
| Deferred tax liabilities | 18 | 20 | 20 |
| Long-term liabilities for right of use fixed assets | 75 | 74 | 62 |
| Other long-term interest–bearing liabilities | – | 175 | – |
| Other long-term liabilities | 5 | 6 | 5 |
| Total long-term liabilities | 563 | 781 | 586 |
| Short-term liabilities for right of use fixed assets | 13 | 22 | 23 |
| Other short-term interest-bearing liabilities | 11 | 2 | 1 |
| Other current liabilities | 398 | 509 | 373 |
| Total current liabilities | 422 | 533 | 397 |
| Total equity and liabilities | 2,166 | 2,379 | 2,119 |
The carrying amount of financial assets and financial liabilities are considered to be reasonable approximations of their fair values. Financial instruments carried at fair value on the balance sheet consist of derivative instruments. As of 30 June the fair value of derivative instruments that
were assets was MSEK 0 (4), and the fair value of derivative instruments that were liabilities was MSEK 1 (1). These measurements belong in level 2 in the fair value hierarchy.
| 30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 | |
|---|---|---|---|
| Opening balance | 1,136 | 1,026 | 1,026 |
| Net income for the period | 77 | 186 | 321 |
| Other comprehensive income | –37 | 52 | 73 |
| Total comprehensive income | 40 | 238 | 394 |
| Dividend | – | –164 | –164 |
| Own share buy-backs | – | –50 | –136 |
| Sale of own shares to satisfy LTI – options exercised | 3 | 14 | 13 |
| Long-term incentive plan | 2 | 1 | 3 |
| Closing balance | 1,181 | 1,065 | 1,136 |
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019/20 | 2019 | |
| Earnings before tax | 23 | 119 | 103 | 240 | 316 | 453 |
| Reversal of depreciation, amortisation and write-down of fixed assets | 23 | 25 | 43 | 50 | 92 | 99 |
| Reversal of net income from joint venture | –3 | –2 | –9 | –8 | –21 | –20 |
| Reversal of other non-cash items | 26 | 7 | 34 | 10 | 47 | 23 |
| Taxes paid | –5 | –29 | –20 | –48 | –107 | –135 |
| Cash flow from operating activities before changes in working capital | 64 | 120 | 151 | 244 | 327 | 420 |
| Change in working capital | 23 | 8 | 17 | –14 | –3 | –34 |
| Cash flow from operating activities | 87 | 128 | 168 | 230 | 324 | 386 |
| Investments in property, plant and equipment | –1 | –4 | –4 | –10 | –13 | –19 |
| New loans paid to joint venture | – | – | –40 | – | –40 | – |
| Loans repayment from joint venture | – | – | 15 | – | 15 | – |
| Other repayment of long-term receivables | 1 | – | 3 | – | 3 | – |
| Net cash flow from long term receivables | 1 | – | –22 | – | –22 | – |
| Cash flow from investing activities | – | –4 | –26 | –10 | –35 | –19 |
| Dividend | – | –164 | – | –164 | – | –164 |
| Dividend received from joint venture | – | 2 | – | 2 | – | 2 |
| Buy-back of own shares | – | –50 | – | –50 | –86 | –136 |
| Selling of own shares to satisfy LTI – options exercised | 3 | 14 | 3 | 14 | 2 | 13 |
| New loans | 10 | – | 10 | – | 11 | 1 |
| Repayment of loans | –6 | –9 | –9 | –15 | –201 | –207 |
| Pension payments and other cash flows from financing activities | –16 | –21 | –34 | –35 | –38 | –39 |
| Cash flow from financing activities | –9 | –228 | –30 | –248 | –312 | –530 |
| Cash flow for the period | 78 | –104 | 112 | –28 | –12 | –163 |
| Cash and bank assets, opening balance | 582 | 780 | 531 | 683 | 677 | 683 |
| Exchange-rate difference in cash and bank assets | –29 | 1 | –12 | 22 | –23 | 11 |
| Cash and bank assets, closing balance | 631 | 677 | 631 | 677 | 631 | 531 |
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019/20 | 2019 | |
| Basic earnings per share before items affecting comparability, SEK | 0.84 | 2.39 | 2.44 | 4.82 | 5.99 | 8.37 |
| Basic earnings per share, SEK | 0.44 | 2.39 | 2.04 | 4.82 | 5.59 | 8.37 |
| Diluted earnings per share, SEK | 0.44 | 2.36 | 2.04 | 4.79 | 5.59 | 8.27 |
| Equity per share, SEK | 31.24 | 27.69 | 31.24 | 27.69 | 31.24 | 30.09 |
| Cash-flow from current operations per share, SEK | 2.30 | 3.32 | 4.45 | 5.97 | 8.52 | 10.05 |
| Basic weighted average no. of shares (000's) | 37,772 | 38,626 | 37,769 | 38,629 | 37,942 | 38,369 |
| Diluted weighted average no. of shares (000's) | 37,772 | 39,107 | 37,769 | 38,939 | 37,944 | 38,849 |
| Number of shares at period-end (000's) | 37,792 | 38,452 | 37,792 | 38,452 | 37,792 | 37,767 |
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019/20 | 2019 | |
| Sales growth, % | –38 | –8 | –29 | –7 | n/a | –17 |
| Sales growth, constant currency, %2) | –38 | –12 | –30 | –12 | n/a | –20 |
| EBITDA margin before items affecting comparability, % | 21.0 | 26.6 | 22.4 | 26.5 | 26.5 | 28.4 |
| EBITDA margin, % | 15.2 | 26.6 | 19.9 | 26.5 | 25.6 | 28.4 |
| Operating margin before items affecting comparability, % | 14.2 | 21.9 | 17.0 | 22.0 | 21.3 | 23.5 |
| Operating margin, % | 8.3 | 21.9 | 14.5 | 22.0 | 20.2 | 23.5 |
| Capital Employed, MSEK | 1,033 | 1,121 | 1,033 | 1,121 | 1,033 | 1,126 |
| ROCE before items affecting comparability, % | 32.0 | 49.2 | 32.0 | 49.2 | 32.0 | 42.5 |
| ROCE, % | 30.3 | 49.6 | 30.3 | 49.6 | 30.3 | 42.5 |
| ROE, % | 18.7 | 39.0 | 18.7 | 39.0 | 18.7 | 29.5 |
| Working Capital, MSEK | –36 | –20 | –36 | –20 | –36 | 18 |
| Working capital as a % of annual sales | –2.2 | –0.9 | –2.2 | –0.9 | –2.2 | 0.9 |
| Net Debt, MSEK2) | –67 | 102 | –67 | 102 | –67 | 54 |
| Gearing ratio, % | –6 | 10 | –6 | 10 | –6 | 5 |
| Net investments in PPE | 1 | 4 | 4 | 10 | 13 | 19 |
| R&D, % | 2.6 | 2.4 | 2.5 | 2.3 | 2.3 | 2.3 |
| Number of employees, average | 555 | 872 | 644 | 893 | 719 | 844 |
1) For additional information see pages 30–31 and 33.
2) For additional information see page 14.
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019/20 | 2019 | |
| Net sales | 342 | 553 | 798 | 1,119 | 1,691 | 2,012 |
| Direct material costs | –170 | –264 | –380 | –530 | –798 | –948 |
| Personnel costs | –81 | –120 | –192 | –242 | –405 | –455 |
| Depreciation, amortisation and write-down of fixed assets | –23 | –25 | –43 | –50 | –92 | –99 |
| Share of net income in joint venture | 2 | 2 | 9 | 8 | 21 | 20 |
| Other operating income and expenses | –42 | –25 | –77 | –58 | –77 | –58 |
| Operating income | 28 | 121 | 115 | 247 | 340 | 472 |
| Financial income and expense | –5 | –2 | –12 | –7 | –24 | –19 |
| Earnings before tax | 23 | 119 | 103 | 240 | 316 | 453 |
| Taxes | –6 | –27 | –26 | –54 | –104 | –132 |
| Net income for the period | 17 | 92 | 77 | 186 | 212 | 321 |
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019/20 | 2019 | |
| Tooling income | 1 | 3 | 2 | 4 | 8 | 10 |
| Royalty income from joint venture | 9 | 15 | 18 | 30 | 46 | 58 |
| Amortisation of acquisition related surplus values | –10 | –9 | –20 | –19 | –40 | –39 |
| UK pension benefit, equalisation | – | – | – | – | – | – |
| Customer contract provisions | – | – | – | – | – | – |
| Restructuring cost | –20 | – | –20 | – | –20 | – |
| Other | 1 | 2 | 3 | 5 | 4 | 6 |
| Other operating income and expenses | –19 | 11 | –17 | 20 | –2 | 35 |
The Americas segment comprises the Group's operations in the USA and South America. As our operations in India and China remain relatively small in comparison to our Western facilities, Europe & RoW continues to be reported as a single combined segment, in line with our management structure, comprising the Group's operations in Europe, India and China. The evaluation of an operating segment's
earnings is based upon its operating income or EBIT. Financial assets and liabilities are not allocated to segments.
Proportional consolidation of Alfdex is used in Europe & RoW in the segment reporting, but adjusted to equity accounting in the statements according to IFRS 11.
| Apr–Jun | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims–Adjs | Group | ||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||
| Total net sales | 174 | 242 | 227 | 402 | –59 | –91 | 342 | 553 | |||
| External net sales | 172 | 237 | 220 | 383 | –50 | –67 | 342 | 553 | |||
| Operating income before items affecting comparability | 20 | 38 | 30 | 84 | –2 | –1 | 48 | 121 | |||
| Operating income | 19 | 38 | 11 | 84 | –2 | –1 | 28 | 121 | |||
| Operating margin before items affecting comparability, % | 11.2 | 15.8 | 13.8 | 22.0 | n/a | n/a | 14.2 | 21.9 | |||
| Operating margin, % | 10.6 | 15.8 | 5.2 | 22.0 | n/a | n/a | 8.3 | 21.9 | |||
| Financial income and expense | – | – | – | – | –5 | –1 | –5 | –1 | |||
| Earnings before tax | 19 | 38 | 11 | 84 | –7 | –3 | 23 | 119 | |||
| Assets | 497 | 568 | 1,189 | 1,438 | 480 | 373 | 2,166 | 2,379 | |||
| Liabilities | 252 | 285 | 707 | 822 | 26 | 207 | 985 | 1,314 | |||
| Capital employed | 305 | 324 | 734 | 794 | –6 | 3 | 1,033 | 1,121 | |||
| ROCE before items affecting comparability, % | 38.1 | 60.7 | 30.8 | 44.2 | n/a | n/a | 32.0 | 49.2 | |||
| ROCE, % | 37.8 | 70.7 | 28.4 | 41.0 | n/a | n/a | 30.3 | 49.6 | |||
| Net investments in PPE | – | 1 | 2 | 4 | –1 | –1 | 1 | 4 | |||
| Depreciation, goodwill and fixed asset write-downs | 7 | 7 | 18 | 20 | –2 | –2 | 23 | 25 | |||
| Number of employees, average | 220 | 304 | 401 | 640 | –66 | –72 | 555 | 872 |
| Jan–Jun | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims–Adjs | Group | ||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||
| Total net sales | 366 | 492 | 578 | 815 | –146 | –188 | 798 | 1,119 | |||
| External net sales | 360 | 481 | 556 | 778 | –118 | –140 | 798 | 1,119 | |||
| Operating income before items affecting comparability | 41 | 75 | 98 | 174 | –4 | –2 | 135 | 247 | |||
| Operating income | 40 | 75 | 79 | 174 | –4 | –2 | 115 | 247 | |||
| Operating margin before items affecting comparability, % | 11.3 | 15.5 | 17.7 | 22.4 | n/a | n/a | 17.0 | 22.0 | |||
| Operating margin, % | 11.0 | 15.5 | 14.3 | 22.4 | n/a | n/a | 14.5 | 22.0 | |||
| Financial income and expense | – | – | – | – | –12 | –7 | –12 | –7 | |||
| Earnings before tax | 40 | 75 | 79 | 174 | –16 | –9 | 103 | 240 | |||
| Assets | 497 | 568 | 1,189 | 1,438 | 480 | 373 | 2,166 | 2,379 | |||
| Liabilities | 252 | 285 | 707 | 822 | 26 | 207 | 985 | 1,314 | |||
| Capital employed | 305 | 324 | 734 | 794 | –6 | 3 | 1,033 | 1,121 | |||
| ROCE before items affecting comparability, % | 38.1 | 60.7 | 30.8 | 44.2 | n/a | n/a | 32.0 | 49.2 | |||
| ROCE, % | 37.8 | 70.7 | 28.4 | 41.0 | n/a | n/a | 30.3 | 49.6 | |||
| Net investments in PPE | 1 | 3 | 18 | 35 | –15 | –28 | 4 | 10 | |||
| Depreciation, goodwill and fixed asset write-downs | 14 | 14 | 33 | 38 | –4 | –2 | 43 | 50 | |||
| Number of employees, average | 244 | 315 | 473 | 650 | –72 | –72 | 645 | 893 |
Each end-market will have its own seasonality profile based on the end-users, e.g. sales of agricultural machinery will be linked to harvest periods in the Northern and Southern hemispheres. However, there is no significant seasonality in the demand profile of Concentric's customers and, therefore, the most significant driver is actually the number of working days in the period.
The weighted average number of working days in the second quarter
was 55 (60) for the Group, with an average of 58 (62) working days for the Americas region and 53 (58) working days for the Europe & RoW region.
The weighted average number of working days in the first six months was 115 (123) for the Group, with an average of 119 (125) working days for the Americas region and 112 (122) working days for the Europe & RoW region.
| Apr–Jun | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims–Adjs | Group | |||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||
| USA | 152 | 199 | 7 | 12 | –6 | –12 | 153 | 199 | ||
| Rest of North America | 4 | 9 | 2 | 3 | – | – | 6 | 12 | ||
| South America | 7 | 8 | 1 | – | –1 | 1 | 7 | 9 | ||
| Germany | 2 | 4 | 57 | 116 | –9 | –19 | 50 | 101 | ||
| UK | 1 | 3 | 17 | 36 | 1 | – | 19 | 39 | ||
| Sweden | – | – | 25 | 44 | –8 | –20 | 17 | 24 | ||
| Rest of Europe | 1 | 2 | 57 | 112 | –7 | –3 | 51 | 111 | ||
| Asia | 4 | 11 | 53 | 59 | –20 | –13 | 37 | 57 | ||
| Other | 1 | 1 | 1 | 1 | – | –1 | 2 | 1 | ||
| Total Group | 172 | 237 | 220 | 383 | –50 | –67 | 342 | 553 |
| Jan–Jun | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims–Adjs | Group | ||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||
| USA | 319 | 412 | 20 | 28 | –19 | –27 | 320 | 413 | |
| Rest of North America | 14 | 19 | 4 | 6 | –1 | – | 17 | 25 | |
| South America | 10 | 17 | 1 | 1 | – | – | 11 | 18 | |
| Germany | 4 | 5 | 161 | 236 | –26 | –37 | 139 | 204 | |
| UK | 2 | 7 | 49 | 72 | – | – | 51 | 79 | |
| Sweden | – | – | 63 | 95 | –22 | –44 | 41 | 51 | |
| Rest of Europe | 3 | 3 | 155 | 236 | –18 | –19 | 140 | 221 | |
| Asia | 8 | 17 | 100 | 103 | –34 | –14 | 74 | 106 | |
| Other | – | 1 | 3 | 1 | 2 | 1 | 5 | 2 | |
| Total Group | 360 | 481 | 556 | 778 | –118 | –140 | 798 | 1,119 |
| Apr–Jun | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims–Adjs | Group | ||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||
| Concentric branded engine products | 55 | 92 | 65 | 155 | – | – | 120 | 247 | |
| LICOS branded engine products | – | – | 28 | 64 | – | – | 28 | 64 | |
| Alfdex branded engine products | – | – | 50 | 67 | –50 | –67 | – | – | |
| Total engine products | 55 | 92 | 143 | 286 | –50 | –67 | 148 | 311 | |
| Total hydraulics products | 117 | 145 | 77 | 97 | – | – | 194 | 242 | |
| Total Group | 172 | 237 | 220 | 383 | –50 | –67 | 342 | 553 |
| Jan–Jun | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims–Adjs | Group | |||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||
| Concentric branded engine products | 122 | 192 | 180 | 320 | – | – | 302 | 512 | ||
| LICOS branded engine products | – | – | 78 | 118 | – | – | 78 | 118 | ||
| Alfdex branded engine products | – | – | 118 | 140 | –118 | –140 | – | – | ||
| Total engine products | 122 | 192 | 376 | 578 | –118 | –140 | 380 | 630 | ||
| Total hydraulics products | 238 | 289 | 180 | 200 | – | – | 418 | 489 | ||
| Total Group | 360 | 481 | 556 | 778 | –118 | –140 | 798 | 1,119 |
| Apr-Jun | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims/Adjs | Group | ||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||
| Trucks | 11 | 32 | 134 | 243 | –50 | –67 | 95 | 208 | |
| Construction | 53 | 76 | 38 | 59 | – | – | 91 | 135 | |
| Industrial | 84 | 94 | 31 | 55 | – | – | 115 | 149 | |
| Agriculture | 24 | 35 | 17 | 26 | – | – | 41 | 61 | |
| Total Group | 172 | 237 | 220 | 383 | –50 | –67 | 342 | 553 |
| Jan–Jun | ||||||||
|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims/Adjs | Group | |||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Trucks | 29 | 74 | 315 | 486 | –118 | –140 | 226 | 420 |
| Construction | 113 | 148 | 102 | 131 | – | – | 215 | 279 |
| Industrial | 168 | 184 | 96 | 101 | – | – | 264 | 285 |
| Agriculture | 50 | 75 | 43 | 60 | – | – | 93 | 135 |
| Total Group | 360 | 481 | 556 | 778 | –118 | –140 | 798 | 1,119 |
The Parent Company is a related party to its subsidiaries and joint venture. Transactions with subsidiaries and joint venture occur on commercial market terms. No transactions have been carried out between Concentric AB and its subsidiary undertakings and any other related parties that had a material impact on either the company's or the group's financial position and results.
There were no significant post balance sheet events to report.
Descriptions of Concentric's business and its objectives, the excellence programme, its products, the driving forces it faces, market position and the end-markets it serves are all presented in the 2019 Annual Report on pages 6–9 and pages 14–33.
All business operations involve risk – managed risk-taking is a condition of maintaining a sustainable profitable business. Risks may arise due to events in the world and can affect a given industry or market or can be
specific to a single company or group. Concentric works continuously to identify, measure and manage risk, and in some cases Concentric is able to influence the likelihood that a risk-related event will occur. In cases in which such events are beyond Concentric's control, the aim is to minimise the consequences.
The COVID-19 pandemic has had a significant effect on the global economy and the demand for the Group's products and services in the second quarter, described at previous pages in this report. With the high uncertainty surrounding the situation and potential initiatives by authorities and customers, it is very difficult to predict the full financial impact that the situation may have on the Group for the coming quarters. As of June 30, there is no significant impact on any balance sheet items.
The risks to which Concentric may be exposed are classified into four main categories:
Concentric's Board of Directors and Senior management team have reviewed the development of these significant risks and uncertainties since the publication of the 2019 Annual Report and confirm that there have been no changes other than those comments made above in respect of market developments during 2020. Please refer to the Risk and Risk Management section on pages 67–70 of the 2019 Annual Report for further details.
This interim report for the Concentric AB group is prepared in accordance with IAS 34 Interim Financial Reporting and applicable rules in the Annual Accounts Act. The report for the Parent Company is prepared in accordance with the Annual Accounts Act, Chapter 9 and applicable rules in RFR2 Accounting for legal entities.
The basis of accounting and the accounting policies adopted in preparing this interim report are consistent for all periods presented and comply with those policies stated in the 2019 Annual Report.
Government grants received related to specific expense items are netted off against the expense item to which the grant pertains, so long as all conditions for the grant have been met and the Group has reasonable assurances the grant will be received. Grants received for expenses that have already been incurred will be recognised once these conditions have been met. Grants that do not pertain to specific expenses are recognised as other operating income. Government grants connected to the acquisition of fixed assets reduce the acquisition value of the particular assets. This means that the asset has been recognised at a net acquisition value, on which the size of depreciation has been based.
Concentric has operations in Argentina. During the third quarter 2018, Argentina was declared a hyperinflationary economy under the criteria in IAS 29. Concentric has assessed the impact of making the adjustments required by IAS 29 and has concluded that the impact on the Group's financial statements is non-material due to the limited extent of the operations in Argentina compared with the Group as a whole. The Group continues to monitor the situation in Argentina.
None of the IFRS and IFRIC interpretations endorsed by the EU are considered to have a material impact on the group.
Net sales for the first six months reflected the royalty income received from the joint venture, Alfdex AB.
Exchange rate gains on foreign liabilities to subsidiaries was MSEK 3 (–58) for the first six months, an increase with MSEK 61. Last year the shares and receivables in our subsidiary in Argentina, was impaired with MSEK 35.
The total number of holdings of own shares at 1 January 2020 was 1,156,667 (1,210,516) and shares transferred in 2017–2019 to an Employee Share Ownership Trust ("ESOT") was 300,700 (188,020). Including these shares the company's holdings was 1,457,367 (1,398,536) and the total number of shares in issue was 39,224,100 (40,031,100).
On 23 April 2020, the AGM resolved to retire 926,500 of the company's own repurchased shares. The retirement of shares has been carried out
through a reduction of share capital with retirement of shares and a subsequent bonus issue to restore the share capital.
The annual general meeting also resolved to transfer up to 138,600 shares to an Employee Share Ownership Trust ("ESOT") as a part of a Joint Share Ownership Plan ("JSOP") under LTI 2020. In accordance with the annual general meeting's resolution and the terms of LTI 2020, the board of Concentric has executed the transfer in regards to 93,712 shares. The ESOT has also transferred 89,600 own shares to Concentric.
The company did not repurchase any own shares during the second quarter, but have sold 25,290 (169,400) of own shares, to exercise and satisfy LTI-programme.
The total number of holdings of own shares at 30 June 2020 was 200,765 (471,669) and the total number of shares in issue was 38,297,600 (39,224,100). Consequently the company's total holdings of own shares now represent 0.5% (1.2) of the total number of shares. In addition to this, the total number of own shares transferred to the ESOT 304,812 (300,700). Including these shares the company's holdings was 505,577 (772,369) representing 1.3% (2.0) of the total number of shares.
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019/20 | 2019 | |
| Net sales | 10 | 17 | 20 | 32 | 50 | 62 |
| Operating costs | –5 | –6 | –10 | –10 | –20 | –20 |
| Operating income | 5 | 11 | 10 | 22 | 30 | 42 |
| Income from shares in subsidiaries | 1 | –35 | 1 | –35 | 748 | 712 |
| Income from shares in joint venture | – | 2 | – | 2 | – | 2 |
| Net foreign exchange rate differences | 61 | 10 | 3 | –58 | –15 | –76 |
| Other financial income and expense | –2 | –4 | –5 | –9 | –13 | –17 |
| Earnings before tax | 65 | –16 | 9 | –78 | 750 | 663 |
| Taxes | –14 | –6 | –2 | 7 | –2 | 7 |
| Net income for the period1) | 51 | –22 | 7 | –71 | 748 | 670 |
1) Total Comprehensive Income for the Parent Company is the same as Net income/loss for the period.
| 30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 | |
|---|---|---|---|
| Shares in subsidiaries | 3,149 | 3,149 | 3,149 |
| Shares in joint venture | 10 | 10 | 10 |
| Long-term loans receivable from subsidiaries | 2 | 1 | 1 |
| Long-term loans receivable from joint ventures | 25 | – | – |
| Deferred tax assets | 19 | 23 | 22 |
| Total financial fixed assets | 3,205 | 3,183 | 3,182 |
| Other current receivables | 5 | 6 | 4 |
| Short-term receivables from subsidiaries | 94 | 170 | 17 |
| Short-term loans receivable from joint ventures | – | – | 3 |
| Cash and cash equivalents | 507 | 388 | 405 |
| Total current assets | 606 | 564 | 429 |
| Total assets | 3,811 | 3,747 | 3,611 |
| Total shareholders' equity | 1,837 | 1,173 | 1,827 |
| Pensions and similar obligations | 18 | 18 | 18 |
| Long-term interest-bearing liabilities | – | 175 | – |
| Long-term loans payable to subsidiaries | 861 | 2,356 | 1,063 |
| Total long-term liabilities | 879 | 2,549 | 1,081 |
| Short-term loans payable to subsidiaries | 1,086 | 16 | 697 |
| Other current liabilities | 9 | 9 | 6 |
| Total current liabilities | 1,095 | 25 | 703 |
| Total equity and liabilities | 3,811 | 3,747 | 3,611 |
| 30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 | |
|---|---|---|---|
| Opening balance | 1,827 | 1,444 | 1,444 |
| Net income for the period | 7 | –71 | 670 |
| Dividend | – | –164 | –164 |
| Sale of own shares to satisfy LTI options exercised | 3 | 14 | 13 |
| Buy-back of own shares | – | –50 | –136 |
| Closing balance | 1,837 | 1,173 | 1,827 |
Concentric AB (publ) is listed on NASDAQ OMX Stockholm, Mid Cap. The information in this report is of the type that Concentric AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out below, at 8.00 CET on 23 July, 2020.
This report contains forward-looking information in the form of statements concerning the outlook for Concentric's operations. This information is based on the current expectations of Concentric's management, as well as estimates and forecasts. The actual future outcome could vary significantly compared with the information provided in this report, which is forward-looking, due to such considerations as changed conditions concerning the economy, market and competition.
www.concentricab.com contains information about the Company, the share and insider information as well as archives for reports and press releases.
Interim report January – September 2020 4 November, 2020 Interim report January – December 2020 9 February, 2021
David Woolley (President and CEO) or Marcus Whitehouse (CFO) at Tel: +44 (0) 121 445 6545 or E-mail: [email protected]
Corporate Registration Number 556828-4995
The Board of Directors and Chief Executive Officer warrant that the report gives a true and fair overview of the operations, financial position and results of the Group and parent company, and describes significant risks and uncertainties faced by the parent company and the companies included in the Group.
Kenth Eriksson Chairman of Board
Martin Lundstedt Member of the Board
Marianne Brismar Member of the Board
Martin Sköld Member of the Board
Anders Nielsen Member of the Board
Claes Magnus Åkesson Member of the Board
Karin Gunnarsson Member of the Board
Susanna Schneeberger Member of the Board
David Woolley President and CEO
Our review report was submitted on 23 July, 2020 KPMG AB
Joakim Thilstedt Authorised Public Accountant
To the Board of Directors of Concentric AB (publ.) Corp. id. 556828-4995
We have reviewed the condensed interim financial information (interim report) of Concentric AB (publ), as of 30 June, 2020 and the six-month period then ended. The Board of Directors and the President and CEO are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
We conducted our review in accordance with International Standard on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing practices and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, for the Group in accordance with IAS 34 and the Annual Accounts Act, and for the Parent Company in accordance with the Annual Accounts Act.
Stockholm, 23 July, 2020
KPMG AB
Joakim Thilstedt Authorised Public Accountant
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | |||
|---|---|---|---|---|---|---|
| EBIT or operating income before items affecting comparability | 2020 | 2019 | 2020 | 2019 | 2019/20 | 2019 |
| EBIT or operating income | 28 | 121 | 115 | 247 | 340 | 472 |
| Items affecting comparability: | ||||||
| Restructuring costs | 20 | – | 20 | – | 20 | – |
| Operating income before items affecting comparability | 48 | 121 | 135 | 247 | 360 | 472 |
| Net Sales | 342 | 553 | 798 | 1,119 | 1,691 | 2,012 |
| Operating margin (%) | 8.3 | 21.9 | 14.5 | 22.0 | 20.2 | 23.5 |
| Operating margin before items affecting comparability (%) | 14.2 | 21.9 | 17.0 | 22.0 | 21.3 | 23.5 |
| EBITDA or operating income | Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec | ||
|---|---|---|---|---|---|---|
| before amortisation and depreciation, before items affecting comparability | 2020 | 2019 | 2020 | 2019 | 2019/20 | 2019 |
| EBIT or operating income | 28 | 121 | 115 | 247 | 340 | 472 |
| Operating amortisation/depreciation | 13 | 15 | 23 | 31 | 52 | 60 |
| Amortisation of purchase price allocation | 10 | 10 | 20 | 19 | 40 | 39 |
| EBITDA or operating income before amortisation and depreciation | 51 | 146 | 158 | 297 | 432 | 571 |
| Restructuring costs | 20 | – | 20 | – | 20 | – |
| EBITDA or operating income before amortisation and depreciation, before items affecting comparability |
71 | 146 | 178 | 297 | 452 | 571 |
| Net sales | 342 | 553 | 798 | 1,119 | 1,691 | 2,012 |
| EBITDA margin (%) | 15.2 | 26.6 | 19.9 | 26.5 | 25.6 | 28.4 |
| EBITDA margin, before items affecting comparability (%) | 21.0 | 26.6 | 22.4 | 26.5 | 26.5 | 28.4 |
| Apr–Jun | Jan–Jun | Jul–Jun | Jan–Dec 2019 |
|||
|---|---|---|---|---|---|---|
| Net income before items affecting comparability | 2020 | 2019 | 2020 | 2019 | 2019/20 | |
| Net income | 17 | 92 | 77 | 186 | 212 | 321 |
| Items affecting comparability after tax | 15 | – | 15 | – | 15 | – |
| Net income before items affecting comparability | 32 | 92 | 92 | 186 | 227 | 321 |
| Basic average number of shares (000) | 37,772 | 38,626 | 37,769 | 38,629 | 37,942 | 38,369 |
| Basic earnings per share | 0.44 | 2.39 | 2.04 | 4.82 | 5.59 | 8.37 |
| Basic earnings per share before items affecting comparability | 0.84 | 2.39 | 2.44 | 4.82 | 5.99 | 8.37 |
| Net debt | 30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 |
|---|---|---|---|
| Pensions and similar obligations | 465 | 506 | 499 |
| Liabilities for right of use fixed assets | 88 | 96 | 85 |
| Long term interest bearing liabilities | – | 175 | – |
| Short term interest bearing liabilities | 11 | 2 | 1 |
| Total interest bearing liabilities | 564 | 779 | 585 |
| Cash and cash equivalents | –631 | –677 | –531 |
| Total net debt | –67 | 102 | 54 |
| Net debt, excluding pension obligations | –532 | –404 | –445 |
| Capital employed | 30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 |
|---|---|---|---|
| Total assets | 2,166 | 2,379 | 2,119 |
| Interest bearing financial assets | –29 | –6 | –6 |
| Cash and cash equivalents | –631 | –677 | –531 |
| Tax assets | –165 | –172 | –171 |
| Non interest bearing assets (excl taxes) | 1,341 | 1,524 | 1,411 |
| Non interest bearing liabilities (incl taxes) | –420 | –533 | –395 |
| Tax liabilities | 112 | 130 | 110 |
| Non interest bearing liabilities (excl taxes) | –308 | –403 | –285 |
| Total capital employed | 1,033 | 1,121 | 1,126 |
| Working capital | 30 Jun 2020 | 30 Jun 2019 | 31 Dec 2019 |
|---|---|---|---|
| Accounts receivable | 173 | 245 | 181 |
| Other current receivables | 57 | 81 | 62 |
| Inventory | 132 | 162 | 147 |
| Working capital assets | 362 | 488 | 390 |
| Accounts payable | –145 | –208 | –156 |
| Other current payables | –253 | –300 | –216 |
| Working capital liabilities | –398 | –508 | –372 |
| Total working capital | –36 | –20 | 18 |
| Americas Sales, MSEK 172 189 179 203 237 244 296 315 Book-to-bill, % 72 111 91 97 89 92 92 82 Operating income before items affecting comparability, MSEK 20 21 58 28 38 37 48 60 Operating margin before items affecting comparability, % 11.2 11.3 32.3 14.1 15.8 15.3 18.0 18.8 Europe & RoW Sales (including Alfdex), MSEK 220 336 334 320 383 394 345 367 Book-to-bill, % 86 85 103 91 88 97 108 97 Operating income before items affecting comparability, MSEK 30 68 80 63 84 90 81 84 13.8 20.2 24.1 19.7 22.0 22.8 23.4 22.9 Operating margin before items affecting comparability, % Alfdex eliminations Sales, MSEK –50 –69 –83 –60 –67 –73 –59 –60 Operating income before items affecting comparability, MSEK –2 –2 –4 1 –1 –1 7 –2 Group Sales (excluding Alfdex), MSEK 342 456 430 463 553 566 582 622 Book-to-bill, % 79 94 99 94 88 95 102 90 Operating income before items affecting comparability, MSEK 48 87 134 91 121 126 136 142 Operating margin before items affecting comparability, % 14.2 19.1 31.1 19.8 21.9 22.2 24.8 22.9 Basic earnings per share, SEK 0.44 1.60 1.87 1.67 2.39 2.43 2.95 2.74 Return on equity, % 18.7 25.4 29.5 34.4 39.0 39.5 41.6 40.3 Cash flow from operating activities per share, SEK 2.30 2.15 1.53 2.53 3.32 2.65 3.44 4.17 Working capital as % of annualised sales –2.2 1.2 0.9 –0.9 –0.9 –0.7 –1.2 –2.5 Net debt, MSEK –67 27 54 207 102 27 12 37 Gearing ratio, % –6 2 5 20 10 2 1 4 Gearing ratio (excl Pensions), % –45 –38 –39 –44 –38 –42 –49 –43 |
Q2/2020 | Q1/2020 | Q4/2019 | Q3/2019 | Q2/2019 | Q1/2019 | Q4/2018 | Q3/2018 | Q2/2018 |
|---|---|---|---|---|---|---|---|---|---|
| 285 | |||||||||
| 103 | |||||||||
| 33 | |||||||||
| 11.5 | |||||||||
| 388 | |||||||||
| 94 | |||||||||
| 94 | |||||||||
| 24.4 | |||||||||
| –70 | |||||||||
| –1 | |||||||||
| 603 | |||||||||
| 97 | |||||||||
| 126 | |||||||||
| 20.9 | |||||||||
| 2.36 | |||||||||
| 38.1 | |||||||||
| 3.61 | |||||||||
| –0.6 | |||||||||
| 132 | |||||||||
| 14 | |||||||||
| –35 |
Americas operating segment comprising the Group's operations in the USA and South America.
An alternative performance measure is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.
Electro Hydraulic Steering.
Employee Share Ownership Trust.
Europe and the rest of the world operating segment comprising the Group's operations in Europe, India and China.
Long-term incentive program to participants resident in the United Kingdom to take part in a Joint Share Ownership Plan.
LTI Long term incentive.
Fixed asset additions net of fixed asset disposals and retirements.
Original Equipment Manufacturers.
Collective term for industrial applications, agricultural machinery and construction equipment end-markets.
Customer sales orders received which will be fulfilled over the next three months.
Research and development expenditure.
Tier 1, Tier 2-supplier Different levels of sub suppliers, typical within the automotive industry
Total sales orders received and booked into the order backlog during a three month period, expressed as a percentage of the total sales invoiced during that same three month period. Book-to-bill is used as an indicator of
the next quarter's net sales in comparison to the sales in the current quarter.
Total assets less interest bearing financial assets and cash and cash equivalents and non-interest bearing liabilities, excluding any tax assets and tax liabilities.
Capital employed measures the amount of capital used and serves as input for return on capital employed.
Year-on-year movement in operating income as a percentage of the year-onyear movement in net sales.
This measure shows operating leverage of the business, based on the marginal contribution from the year-onyear movement in net sales.
Earnings before interest, taxes, depreciation and amortisation. EBITDA is used to measure the cash flow generated from operating activities, eliminating the impact of financing and accounting decisions.
EBITDA as a percentage of net sales. EBITDA margin is used for measuring the cash flow from operating activities.
Earnings before interest and tax. This measure enables the profitability to be compared across locations where corporate taxes differ and irrespective the financing structure of the Company.
Operating income as a percentage of net sales.
Operating profit margin is used for measuring the operational profitability.
Earnings per share, net income divided by the average number of shares.
The earnings per share measure the amount of net profit that is available for payment to its shareholders per share.
Equity at the end of the period divided by number of shares at the end of the period.
Equity per share measures the netasset value backing up each share of the Company's equity and determines if a Company is increasing shareholder value over time.
Ratio of net debt to shareholders' equity.
The net gearing ratio measures the extent to which the company is funded by debt. Because cash and overdraft facilities can be used to pay off debt at short notice, this is calculated based on net debt rather than gross debt.
Net sales less cost of goods sold, as a percentage of net sales. Gross margin measures production profitability.
Total interest-bearing liabilities, including pension obligations and liabilities for leases, less liquid funds.
Net debt is used as an indication of the ability to pay off all debts if these were to fall due simultaneously on the day of calculation, using only available cash and cash equivalents.
Return on capital employed; EBIT or Operating income as a percentage of the average capital employed over rolling 12 months.
Return on capital employed is used to analyse profitability, based on the amount of capital used. The leverage of the Company is the reason that this metric is used next to return on equity, because it not only includes equity, but taken into account other liabilities as well.
Return on equity; net income as a percentage of the average shareholders' equity over rolling 12 months. Return on equity is used to measure
profit generation, given the resources attributable to the Parent Company owners.
Growth rate based on sales restated at prior year foreign exchange rates This measurement excludes the impact of changes in exchange rates,
enabling a comparison on net sales growth over time.
Sales growth derived from new business contracts, i.e. not from changes in market demand or replacement business contracts
Structural changes measure the contribution of changes in group structure to net sales growth.
Adjusted for restructuring costs, impairment, pension curtailment gains/losses and other specific items (including the taxation effects thereon, as appropriate) Enabling a comparison of operational business.
Current assets excluding cash and cash equivalents, less non-interest-bearing current liabilities
Working capital is used to measure the Company's ability, besides cash and cash equivalents, to meet current operational obligations.
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