Quarterly Report • May 6, 2020
Quarterly Report
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INTERIM REPORT Q1/2020
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 456 (566) – sales were down –20% y-o-y. After adjusting for impact of currency (+2%), sales in constant currency were down –22%.
MSEK 87 (126), generating an operating margin of 19.1% (22.2).
MSEK 60 (94); basic EPS of SEK 1.60 (2.43).
MSEK 81 (102); cash generation affected by lower sales.
MSEK 27 (27); gearing ratio of 2% (2).
| Jan–Mar | Apr–Mar | Jan–Dec | |||
|---|---|---|---|---|---|
| Amounts in MSEK | 2020 | 2019 | Change | 2019/20 | 2019 |
| Net sales | 456 | 566 | –20% | 1,902 | 2,012 |
| Operating income | 87 | 126 | –31% | 433 | 472 |
| Earnings before tax | 80 | 121 | –34% | 412 | 453 |
| Net income for the period | 60 | 94 | –36% | 287 | 321 |
| Cash flow from operating activities | 81 | 102 | –21% | 365 | 386 |
| Net debt 2) | 27 | 27 | – | 27 | 54 |
| Operating margin, % | 19.1 | 22.2 | –3.1 | 22.8 | 23.5 |
| Basic EPS, SEK | 1.60 | 2.43 | –0.83 | 7.54 | 8.37 |
| Diluted EPS, SEK | 1.60 | 2.42 | –0.82 | 7.45 | 8.27 |
| Return on equity, % | 25.4 | 39.5 | –14.1 | 25.4 | 29.5 |
| Gearing ratio, % | 2 | 2 | – | 2 | 5 |
1) For additional information see pages 25–26 and 29.
2) For additional information see page 29.
President and CEO, David Woolley, comments on the Q1 2020 Interim Report.
The quarterly published market indices suggest production rates, blended for the Group's end-markets and regions declined by –24% with both the Americas and Europe & RoW reporting negative growth for the third successive quarter. The Group's sales continued to be affected by the overall market slowdown with sales down –20% year-onyear. The sales were down year-on- year for the first quarter by –22% in constant currency and remained slightly ahead of the published indices.
The pandemic, Covid-19, which is impacting the global economy did affect our China operation during the first quarter, which closed for a period following Chinese New Year. During March many of our European & Asian OEM customers have been forced to cease production as national governments imposed restrictions to limit the spread of the virus. Sales in the first quarter were largely unaffected by this rapidly changing environment.
The same market indices indicate every geographic region and every end market application was weaker year-on-year during the first quarter, most notably medium- and heavy-duty trucks declined 38% in North America and 34% in Europe. However the truck market remains the largest end-market and accounts for 41% of the Group's sales.
Concentric's sales in North America, Europe, India and China were down year-on-year in the quarter whilst sales in South America showed a modest increase. Sales to all end-market applications were lower in the first 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.
Concentric Business Excellence has been the 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. The successful implementation of this model has enabled our management teams to work efficiently to reduce the cost of capacity for the reduction in demand from our customers, ensuring the operating margin was maintained at good levels during the first quarter at 19.1% (22.2).
At the Annual General Meeting the Board of Directors of Concentric AB withdrew the previously communicated dividend proposal of SEK 4.50 instead proposing that no dividend is distributed to the shareholders for the 2019 financial year, which was duly approved by shareholders. Due to the current market situation caused by Covid-19, the Board of Directors prioritised maintaining financial flexibility, and provided the market conditions and visibility improves adequately over the year Concentric is planning to reassess the possibility of distributing a dividend later in 2020.
The global pandemic will have a greater impact on our business during the second quarter than the first, as OEM customers' manufacturing facilities remain closed during the early part of the quarter. There is also a great degree of uncertainty on how quickly market will recover post the Covid-19 pandemic.
The overall published market indices blended to Concentric's mix of end market applications and locations suggest the overall market will contract sharply during the second quarter of 2020, most notably the medium- and heavy-duty truck markets in North America and Europe. The off-highway sectors, agricultural machinery and construction equipment, will be impacted by the pandemic, but not to the extent expected in the truck sector because of the nature of their product.
The level of orders received in the first quarter indicate that sales in the second quarter 2020 will be significantly lower than sales in the first quarter, but providing further guidance is extremely difficult with the current uncertainty in the market place.
These are extraordinary times and our management teams are resilient, remain agile and are responding to challenging market conditions, reducing the cost of capacity by furloughing our facilities in various geographic regions and focussing on cash management. The financial position of Concentric is strong, both regarding capital structure and liquidity and Concentric remains committed to meeting our customers' requirements.
CEO LETTER
» These are extraordinary times and our management teams are resilient, remain agile and are responding to challenging market conditions ... «
| Jan–Mar | Jan–Dec | ||||
|---|---|---|---|---|---|
| Amounts in MSEK | 2020 | 2019 | Change | 2019/20 | 2019 |
| Net sales | 456 | 566 | –20% | 1,902 | 2,012 |
| Operating income | 87 | 126 | –31% | 433 | 472 |
| Earnings before tax | 80 | 121 | –34% | 412 | 453 |
| Net income for the period | 60 | 94 | –36% | 287 | 321 |
| Operating margin, % | 19.1 | 22.2 | –3.1 | 22.8 | 23.5 |
| ROCE, % | 37.6 | 50.5 | –12.9 | 37.6 | 42.5 |
| Return on equity, % | 25.4 | 39.5 | –14.2 | 25.4 | 29.5 |
| Basic EPS, SEK | 1.60 | 2.43 | –0.83 | 7.54 | 8.37 |
| Diluted EPS, SEK | 1.60 | 2.42 | –0.82 | 7.45 | 8.27 |
1) For additional information see pages 25–26 and 29.
Net sales for the first quarter were down year-on-year by –20%. After adjusting for the impact of currency (+2%), sales in constant currency were down –22%. The end markets in the first quarter continued to soften resulting in lower sales for Concentric in North America, Europe, India and China whilst sales in South America showed a modest increase. Sales to all end-market applications were lower in the first 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 pandemic, Covid-19 which is impacting the global economy did affect our China operation during the first quarter, which closed for a period following Chinese New Year. During March many of our European & Asian OEM customers have been forced to cease production as national governments imposed restrictions to limit the spread of the virus. Sales in the first quarter were largely unaffected by this rapidly changing environment.
The operating margin for the first quarter was 19.1% (22.2) and the profit drop-out from lower sales was 35%. The business continues to address the cost of capacity through the Concentric Business Excellence program, which efficiently allows our management teams to adapt to lower customer demand. Income from our joint venture (JV) with Alfa Laval, Alfdex was also impacted by the softening market, which reduced income from the JV this quarter to MSEK 16 (21).
Net financial expenses in the first quarter comprised of pension financial expenses of MSEK 4 (4) and other net interest expenses of MSEK 3 (1).
The reported effective tax rate for the first quarter was 24% (22). 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 quarter was SEK 1.60 (2.43), down SEK 0.83 per share. The diluted earnings per share for the first quarter was SEK 1.60 (2.42), down SEK 0.82 per share.
FINANCIAL SUMMARY – GROUP
| Jan–Mar | Apr–Mar | Jan–Dec | |||
|---|---|---|---|---|---|
| Amounts in MSEK | 2020 | 2019 | Change | 2019/20 | 2019 |
| External net sales | 189 | 244 | –23% | 808 | 863 |
| Operating income | 21 | 37 | –43% | 145 | 161 |
| Operating margin, % | 11.3 | 15.3 | –4.0 | 18.0 | 18.7 |
| ROCE, % | 42.7 | 71.0 | –28.3 | 42.7 | 49.9 |
Sales for the first quarter were down year-on-year by –23%. After adjusting for the impact of currency (+2%), sales in constant currency were down –25%.
In the first quarter, demand in the North American market contracted substantially across all four end market applications. Concentric sales into these sectors reduced year-on-year by double-digit percentages. The most significant sales reductions were seen in the truck and agricultural machinery sectors, but construction equipment and to a lesser extent industrial applications also had lower year-on-year sales. Demand in South America also slowed during the first quarter, however year-onyear sales growth was achieved in the region driven by the truck and industrial application sectors offsetting lower sales in the off highway sectors. The operating margin in the first quarter was 11.3% (15.3) and the profit drop-out from lower sales in the quarter was 29%.
| Jan–Mar | |||||
|---|---|---|---|---|---|
| Amounts in MSEK | 2020 | 2019 | Change | 2019/20 | 2019 |
| External net sales (including Alfdex) | 336 | 394 | –15% | 1,374 | 1,432 |
| Operating income | 68 | 90 | –24% | 295 | 317 |
| Operating margin, % | 20.2 | 22.8 | –2.6 | 21.5 | 22.2 |
| ROCE, % | 36.8 | 42.2 | –5.4 | 36.8 | 40.6 |
Sales for the first quarter were down year-on-year by –15%. After adjusting for the impact of currency (+2%), sales in constant currency were down –17%.
Demand in our European markets mirrored that of North America, reporting substantial year-on-year contractions in all end market applications. Again Concentric sales into these sectors reduced year-on-year by double-digit percentages. The most significant sales reductions were seen in the truck and off-highway sectors, agricultural machinery
and construction equipment, however some modest sales growth was achieved in the industrial applications sector. The Indian market continues to remain challenging, the market continues to soften and coupled with an on-going banking crisis creating liquidity issues it's affecting demand across all end-market applications.
The operating margin in the first quarter was 20.2% (22.8) and the profit drop-out from lower sales in the quarter was 38%.
The end-application markets in all regions continued to soften during the first quarter of 2020, down 24% year on year.
■ Sales in the first quarter to our South American end-market applications delivered overall modest growth. Growth in the truck and industrial application sectors was partially offset by lower sales in the off-highway end application sectors.
| Q1-20 vs. Q1-19 | FY-20 vs. FY-19 | |||||
|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Group | Americas | Europe & RoW | Group | |
| Market – weighted average1) | -19% | -27% | -24% | -8% | -15% | -13% |
| Actual – constant currency 2) | –25% | -17% | –22% |
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 -24% year-on-year for the first quarter. Each successive quarter the market growth rate has slowed over the last five quarters with the first quarter of 2020 being the third reporting negative growth for both the Americas and Europe & RoW markets. Actual sales in constant currency for the first quarter –22% for the Group.
The current published forecast market indices for 2020 show the North America and European markets will continue to contract, particularly the medium- and heavy-duty truck sector, whilst the emerging markets of India and South America offer growth potential in the off-highway sectors. 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 second 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.
above reflect the Q1 2020 update of production volumes received from Power Systems Research, Off-Highway Research and the International Truck Association of lift trucks.
The reported cash inflow from operating activities for the first quarter amounted to MSEK 81 (102), which represents SEK 2.15 (2.65) per share.
Total working capital at 31 March was MSEK 23 (−17), which represented 1.2% (−0.7) of annual sales. Working capital increased marginally compared to 31 December 2019.
The Group's net investments in tangible fixed assets amounted to MSEK 3 (6) for the first quarter.
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 quarter 2020.
Overall, the Group's net debt at 31 March was MSEK 27 (27), comprising bank loans of MSEK 1 (180), loans related to leasing MSEK 99 (103) and net pension liabilities of MSEK 509 (524), net of cash amounting to MSEK 582 (780). Shareholders' equity amounted to MSEK 1,253 (1,186), resulting in a gearing ratio of 2% (2) at the end of the first quarter.
The Board of Directors of Concentric AB withdrew the proposal of a dividend and instead proposed no dividend to the shareholders. The AGM meeting resolved in accordance with the board's proposal.
Due to the current market situation caused by COVID-19, the Board of Directors has prioritised maintaining financial flexibility, and provided the market conditions and visibility improves adequately over the year, Concentric is planning to reassess the possibility of distributing a dividend later in 2020.
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.
| Jan–Mar | Apr–Mar | Jan–Dec | ||
|---|---|---|---|---|
| 2020 | 2019 | 2019/20 | 2019 | |
| Net sales | 456 | 566 | 1,902 | 2,012 |
| Cost of goods sold | –315 | –382 | –1,318 | –1,385 |
| Gross income | 141 | 184 | 584 | 627 |
| Selling expenses | –16 | –20 | –20 | –24 |
| Administrative expenses | –36 | –40 | –136 | –140 |
| Product development expenses | –11 | –13 | –44 | –46 |
| Share of net income in joint venture | 7 | 6 | 21 | 20 |
| Other operating income and expenses | 2 | 9 | 28 | 35 |
| Operating income | 87 | 126 | 433 | 472 |
| Financial income and expenses | –7 | –5 | –21 | –19 |
| Earnings before tax | 80 | 121 | 412 | 453 |
| Taxes | –20 | –27 | –125 | –132 |
| Net income for the period | 60 | 94 | 287 | 321 |
| Parent company shareholders | 60 | 94 | 287 | 321 |
| Non-controlling interest | – | – | – | – |
| Basic earnings per share, SEK | 1.60 | 2.43 | 7.54 | 8.37 |
| Diluted earnings per share, SEK | 1.60 | 2.42 | 7.45 | 8.27 |
| Basic average number of shares (000) | 37,767 | 38,633 | 38,155 | 38,369 |
| Diluted average number of shares (000) | 37,819 | 38,731 | 38,635 | 38,849 |
| Jan–Mar | Apr–Mar | Jan–Dec | ||
|---|---|---|---|---|
| 2020 | 2019 | 2019/20 | 2019 | |
| Net income for the period | 60 | 94 | 287 | 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 | –79 | –63 | –121 | –105 |
| Tax arising from exchange rate differences related to liabilities to foreign operations | 12 | 15 | 13 | 16 |
| Cash-flow hedging | –2 | 2 | –5 | –1 |
| Tax arising from cash-flow hedging | – | – | – | – |
| Foreign currency translation differences | 125 | 111 | 171 | 157 |
| Total other comprehensive income | 56 | 65 | 64 | 73 |
| Total comprehensive income | 116 | 159 | 351 | 394 |
| 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 | |
|---|---|---|---|
| Goodwill | 683 | 651 | 656 |
| Other intangible fixed assets | 158 | 190 | 162 |
| Right of use fixed assets | 97 | 105 | 84 |
| Other tangible fixed assets | 98 | 112 | 98 |
| Share of net assets in joint venture | 65 | 44 | 55 |
| Deferred tax assets | 153 | 150 | 137 |
| Long-term receivables | 29 | 6 | 6 |
| Total fixed assets | 1,283 | 1,258 | 1,198 |
| Inventories | 158 | 173 | 147 |
| Current receivables | 283 | 332 | 243 |
| Cash and cash equivalents | 582 | 780 | 531 |
| Total current assets | 1,023 | 1,285 | 921 |
| Total assets | 2,306 | 2,543 | 2,119 |
| Total Shareholders' equity | 1,253 | 1,186 | 1,136 |
| Pensions and similar obligations | 509 | 524 | 499 |
| Deferred tax liabilities | 21 | 23 | 20 |
| Long-term liabilities for right of use fixed assets | 84 | 80 | 62 |
| Other long-term interest–bearing liabilities | – | 175 | – |
| Other long-term liabilities | 4 | 7 | 5 |
| Total long-term liabilities | 618 | 809 | 586 |
| Short-term liabilities for right of use fixed assets | 15 | 23 | 23 |
| Other short-term interest-bearing liabilities | 1 | 5 | 1 |
| Other current liabilities | 419 | 520 | 373 |
| Total current liabilities | 435 | 548 | 397 |
| Total equity and liabilities | 2,306 | 2,543 | 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 31 March the fair value of derivative instruments that
were assets was MSEK 0 (5), 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.
| 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 | |
|---|---|---|---|
| Opening balance | 1,136 | 1,026 | 1,026 |
| Net income for the period | 60 | 94 | 321 |
| Other comprehensive income | 56 | 65 | 73 |
| Total comprehensive income | 116 | 159 | 394 |
| Dividend | – | – | –164 |
| Own share buy-backs | – | – | –136 |
| Sale of own shares to satisfy LTI – options exercised | – | – | 13 |
| Long-term incentive plan | 1 | 1 | 3 |
| Closing balance | 1,253 | 1,186 | 1,136 |
| Jan–Mar | Apr–Mar | Jan–Dec | ||
|---|---|---|---|---|
| 2020 | 2019 | 2019/20 | 2019 | |
| Earnings before tax | 80 | 121 | 412 | 453 |
| Reversal of depreciation and amortisation of fixed assets | 20 | 25 | 94 | 99 |
| Reversal of net income from joint venture | –6 | –6 | –20 | –20 |
| Reversal of other non-cash items | 8 | 3 | 28 | 23 |
| Taxes paid | –15 | –19 | –131 | –135 |
| Cash flow from operating activities before changes in working capital | 87 | 124 | 383 | 420 |
| Change in working capital | –6 | –22 | –18 | –34 |
| Cash flow from operating activities | 81 | 102 | 365 | 386 |
| Net investments in property, plant and equipment | –3 | –6 | –16 | –19 |
| New loans paid to joint venture | –40 | – | –40 | – |
| Loans repayment from joint venture | 15 | – | 15 | – |
| Other repayment of long-term receivables | 2 | – | 2 | – |
| Net cash flow from long term receivables | –23 | – | –23 | – |
| Cash flow from investing activities | –26 | –6 | –39 | –19 |
| Dividend | – | – | –164 | –164 |
| Dividend received from joint venture | – | – | 2 | 2 |
| Buy-back of own shares | – | – | –136 | –136 |
| Selling of own shares to satisfy LTI – options exercised | – | – | 13 | 13 |
| New loans | – | – | 1 | 1 |
| Repayment of loans | –3 | –6 | –204 | –207 |
| Pension payments and other cash flows from financing activities | –18 | –14 | –43 | –39 |
| Cash flow from financing activities | –21 | –20 | –531 | –530 |
| Cash flow for the period | 34 | 76 | –205 | –163 |
| Cash and bank assets, opening balance | 531 | 683 | 780 | 683 |
| Exchange-rate difference in cash and bank assets | 17 | 21 | 7 | 11 |
| Cash and bank assets, closing balance | 582 | 780 | 582 | 531 |
| Jan–Mar | Apr–Mar | Jan–Dec | ||
|---|---|---|---|---|
| 2020 | 2019 | 2019/20 | 2019 | |
| Basic earnings per share, SEK | 1.60 | 2.43 | 7.54 | 8.37 |
| Diluted earnings per share, SEK | 1.60 | 2.42 | 7.45 | 8.27 |
| Equity per share, SEK | 33.18 | 30.68 | 33.18 | 30.09 |
| Cash-flow from current operations per share, SEK | 2.15 | 2.65 | 9.56 | 10.05 |
| Basic weighted average no. of shares (000's) | 37,767 | 38,633 | 38,155 | 38,369 |
| Diluted weighted average no. of shares (000's) | 37,819 | 38,731 | 38,635 | 38,849 |
| Number of shares at period-end (000's) | 37,767 | 38,633 | 37,767 | 37,767 |
| Jan–Mar | Jan–Dec | |||
|---|---|---|---|---|
| 2020 | 2019 | 2019/20 | 2019 | |
| Sales growth, % | –20 | –6 | n/a | –17 |
| Sales growth, constant currency, %2) | –22 | –12 | n/a | –20 |
| EBITDA margin, % | 23.4 | 26.5 | 27.8 | 28.4 |
| Operating margin, % | 19.1 | 22.2 | 22.8 | 23.5 |
| Capital Employed, MSEK | 1,180 | 1,165 | 1,180 | 1,126 |
| ROCE before items affecting comparability, % | 37.6 | 53.3 | 37.6 | 42.5 |
| ROCE, % | 37.6 | 50.5 | 37.6 | 42.5 |
| ROE, % | 25.4 | 39.5 | 25.4 | 29.5 |
| Working Capital, MSEK | 23 | –17 | 23 | 18 |
| Working capital as a % of annual sales | 1.2 | –0.7 | 1.2 | 0.9 |
| Net Debt, MSEK2) | 27 | 27 | 27 | 54 |
| Gearing ratio, % | 2 | 2 | 2 | 5 |
| Net investments in PPE | 3 | 6 | 16 | 19 |
| R&D, % | 2.4 | 2.3 | 2.3 | 2.3 |
| Number of employees, average | 743 | 917 | 803 | 844 |
1) For additional information see pages 25–26 and 29.
2) For additional information see page 29.
| Jan–Mar | Apr–Mar | Jan–Dec | ||
|---|---|---|---|---|
| 2020 | 2019 | 2019/20 | 2019 | |
| Net sales | 456 | 566 | 1,902 | 2,012 |
| Direct material costs | –210 | –266 | –892 | –948 |
| Personnel costs | –111 | –122 | –444 | –455 |
| Depreciation and amortisation of fixed assets | –20 | –25 | –94 | –99 |
| Share of net income in joint venture | 7 | 6 | 21 | 20 |
| Other operating income and expenses | –35 | –33 | –60 | –58 |
| Operating income | 87 | 126 | 433 | 472 |
| Financial income and expense | –7 | –5 | –21 | –19 |
| Earnings before tax | 80 | 121 | 412 | 453 |
| Taxes | –20 | –27 | –125 | –132 |
| Net income for the period | 60 | 94 | 287 | 321 |
| Jan–Mar | Apr–Mar | Jan–Dec | ||
|---|---|---|---|---|
| 2020 | 2019 | 2019/20 | 2019 | |
| Tooling income | 1 | 1 | 10 | 10 |
| Royalty income from joint venture | 9 | 15 | 52 | 58 |
| Amortisation of acquisition related surplus values | –10 | –10 | –39 | –39 |
| Other | 2 | 3 | 5 | 6 |
| Other operating income and expenses | 2 | 9 | 28 | 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 (including the proportional consolidation of Alfdex), 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 the joint venture company Alfdex is used in Europe & RoW in the segment reporting, but adjusted to equity accounting in the statements according to IFRS 11.
| Americas | Europe & RoW | Elims–Adjs | Group | ||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||
| Total net sales | 192 | 250 | 351 | 413 | –87 | –97 | 456 | 566 | |
| External net sales | 189 | 244 | 336 | 394 | –69 | –72 | 456 | 566 | |
| Operating income | 21 | 37 | 68 | 90 | –2 | –1 | 87 | 126 | |
| Operating margin, % | 11.3 | 15.3 | 20.2 | 22.8 | n/a | n/a | 19.1 | 22.2 | |
| Financial income and expense | – | – | – | – | –7 | –5 | –7 | –5 | |
| Earnings before tax | 21 | 37 | 68 | 90 | –9 | –6 | 80 | 121 | |
| Assets | 557 | 595 | 1,317 | 1,465 | 432 | 483 | 2,306 | 2,543 | |
| Liabilities | 263 | 304 | 782 | 854 | 8 | 199 | 1,053 | 1,357 | |
| Capital employed | 346 | 337 | 816 | 828 | 18 | – | 1,180 | 1,165 | |
| ROCE before items affecting comparability, % | 42.7 | 72.1 | 36.8 | 45.5 | n/a | n/a | 37.6 | 53.3 | |
| ROCE, % | 42.7 | 71.0 | 36.8 | 42.2 | n/a | n/a | 37.6 | 50.5 | |
| Net investments in PPE | 1 | 2 | 16 | 31 | –14 | –27 | 3 | 6 | |
| Depreciation and amortisation of fixed assets | 7 | 7 | 15 | 18 | –2 | – | 20 | 25 | |
| Number of employees, average | 258 | 328 | 567 | 661 | –82 | –72 | 743 | 917 |
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 first quarter was 61 (64) for the Group, with an average of 61 (62) working days for the Americas region and 60 (64) working days for the Europe & RoW region.
| Jan–Mar | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims–Adjs | Group | ||||||
| Amounts in MSEK | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| USA | 167 | 213 | 13 | 15 | –12 | –14 | 168 | 214 | |
| Rest of North America | 10 | 10 | 2 | 3 | – | – | 12 | 13 | |
| South America | 4 | 8 | – | 1 | – | – | 4 | 9 | |
| Germany | 2 | 1 | 104 | 119 | –17 | –17 | 89 | 103 | |
| UK | – | 4 | 32 | 36 | – | – | 32 | 40 | |
| Sweden | – | – | 38 | 50 | –14 | –23 | 24 | 27 | |
| Rest of Europe | 1 | 2 | 98 | 123 | –11 | –14 | 88 | 111 | |
| Asia | 4 | 6 | 48 | 45 | –15 | –2 | 37 | 49 | |
| Other | 1 | – | 1 | 2 | – | –2 | 2 | – | |
| Total Group | 189 | 244 | 336 | 394 | –69 | –72 | 456 | 566 |
| Jan–Mar | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims–Adjs | Group | |||||||
| Amounts in MSEK | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||
| Concentric branded Engine products | 67 | 100 | 115 | 166 | – | – | 182 | 266 | ||
| LICOS branded Engine products | – | – | 50 | 53 | – | – | 50 | 53 | ||
| Alfdex branded Engine products | – | – | 69 | 72 | –69 | –72 | – | – | ||
| Total Engine products | 67 | 100 | 234 | 291 | –69 | –72 | 232 | 319 | ||
| Total Hydraulics products | 122 | 144 | 102 | 103 | – | – | 224 | 247 | ||
| Total Group | 189 | 244 | 336 | 394 | –69 | –72 | 456 | 566 |
| Jan–Mar | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Americas | Europe & RoW | Elims/Adjs | Group | ||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||
| Trucks | 20 | 41 | 195 | 241 | –69 | –72 | 146 | 210 | |
| Construction | 60 | 74 | 64 | 72 | – | – | 124 | 146 | |
| Industrial | 83 | 89 | 51 | 48 | – | – | 134 | 137 | |
| Agriculture | 26 | 40 | 26 | 33 | – | – | 52 | 73 | |
| Total Group | 189 | 244 | 336 | 394 | –69 | –72 | 456 | 566 |
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.
The Board of Directors of Concentric AB withdrew the previously communicated dividend proposal of SEK 4.50 to the Annual General Meeting on April 23, 2020. The Board instead proposed that no dividend is distributed to the shareholders for the 2019 financial year. At the same time, the Nomination Committee withdrew the previously announced proposal to increase Board fees, instead proposing to maintain current Board fees. The AGM meeting resolved in accordance with the board's proposal.
Due to the current market situation caused by COVID-19, the Board of Directors has prioritised maintaining financial flexibility. Provided that the market conditions and visibility improves adequately over the year Concentric is planning to reassess the possibility of distributing a dividend later in 2020.
The financial position of Concentric is strong, both regarding capital structure and liquidity and as previously communicated Concentric is undertaking measures to adapt its operations to meet the customers' requirements.
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 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 and the effects of the pandemic COVID-19 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.
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 quarter reflected the royalty income received from the joint venture, Alfdex AB.
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).
The company did not repurchase any shares during the first quarter and consequently the total holdings of own shares at the end of the quarter was 1,457,367 (1,398,536), which represented 3.7% (3.5) of the total number of shares.
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 total number of holdings of own shares after the above transacations will be 136,455 and the total number of shares in issue will be 38,297,600. Consequently the company's total holdings of own shares will represent 0.4% of the total number of shares. In addition to this, the total number of own shares transferred to the ESOT during 2017–2020 will be 394,412. Including these shares the company's holdings will be 530,867 representing 1.4% of the total number of shares.
| 2020 | |||
|---|---|---|---|
| 2019 | 2019/20 | 2019 | |
| 10 | 15 | 57 | 62 |
| –5 | –4 | –21 | –20 |
| 5 | 11 | 36 | 42 |
| – | – | 712 | 712 |
| – | – | 2 | 2 |
| –58 | –68 | –66 | –76 |
| –3 | –5 | –15 | –17 |
| –56 | –62 | 669 | 663 |
| 12 | 13 | 6 | 7 |
| –44 | –49 | 675 | 670 |
1) Total Comprehensive Income for the Parent Company is the same as Net income/loss for the period.
| 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 | |
|---|---|---|---|
| Shares in subsidiaries | 3,149 | 3,178 | 3,149 |
| Shares in joint venture | 10 | 10 | 10 |
| Long-term loans receivable from subsidiaries | 27 | 7 | 1 |
| Deferred tax assets | 34 | 28 | 22 |
| Total financial fixed assets | 3,220 | 3,223 | 3,182 |
| Other current receivables | 3 | 3 | 4 |
| Short-term receivables from subsidiaries | 82 | 164 | 17 |
| Short-term receivables from joint ventures | – | – | 3 |
| Cash and cash equivalents | 454 | 502 | 405 |
| Total current assets | 539 | 669 | 429 |
| Total assets | 3,759 | 3,892 | 3,611 |
| Total shareholders' equity | 1,783 | 1,395 | 1,827 |
| Pensions and similar obligations | 18 | 18 | 18 |
| Long-term interest-bearing liabilities | – | 175 | – |
| Long-term loans payable to subsidiaries | 881 | 2,281 | 1,063 |
| Total long-term liabilities | 899 | 2,474 | 1,081 |
| Short-term loans payable to subsidiaries | 1,070 | 16 | 697 |
| Other current liabilities | 7 | 7 | 6 |
| Total current liabilities | 1,077 | 23 | 703 |
| Total equity and liabilities | 3,759 | 3,892 | 3,611 |
| 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 | |
|---|---|---|---|
| Opening balance | 1,827 | 1,444 | 1,444 |
| Net income for the period | –44 | –49 | 670 |
| Dividend | – | – | –164 |
| Sale of own shares to satisfy LTI options exercised | – | – | 13 |
| Buy-back of own shares | – | – | –136 |
| Closing balance | 1,783 | 1,395 | 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 6 May, 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 – June 2020 23 July, 2020 Interim report January – September 2020 4 November, 2020
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 This Interim Report has not been audited.
President and CEO
Stockholm, 6 May, 2020 Concentric AB (publ)
| Jan–Mar | Apr–Mar | Jan–Dec | |||
|---|---|---|---|---|---|
| Underlying EBIT or operating income | 2020 | 2019 | 2019/20 | 2019 | |
| EBIT or operating income | 87 | 126 | 433 | 472 | |
| Items affecting comparability: | – | – | – | – | |
| Underlying operating income | 87 | 126 | 433 | 472 | |
| Net Sales | 456 | 566 | 1,902 | 2,012 | |
| Underlying Net Sales | 456 | 566 | 1,902 | 2,012 | |
| Operating margin (%) | 19.1 | 22.2 | 22.8 | 23.5 | |
| Underlying operating margin (%) | 19.1 | 22.2 | 22.8 | 23.5 |
| Jan–Mar | Apr–Mar | Jan–Dec | |||
|---|---|---|---|---|---|
| Underlying EBITDA or operating income before amortisation and depreciation | 2020 | 2019 | 2019/20 | 2019 | |
| EBIT or operating income | 87 | 126 | 433 | 472 | |
| Operating amortisation/depreciation | 10 | 15 | 55 | 60 | |
| Amortisation of purchase price allocation | 10 | 10 | 39 | 39 | |
| EBITDA or operating income before amortisation and depreciation |
107 | 151 | 527 | 571 | |
| Underlying EBITDA or underlying operating income before amortisation and depreciation |
107 | 151 | 527 | 571 | |
| Net sales | 456 | 566 | 1,902 | 2,012 | |
| Underlying Net Sales | 456 | 566 | 1,902 | 2,012 | |
| EBITDA margin (%) | 23.4 | 26.5 | 27.8 | 28.4 | |
| Underlying EBITDA margin (%) | 23.4 | 26.5 | 27.8 | 28.4 |
| Jan–Mar | Apr–Mar | Jan–Dec | |||
|---|---|---|---|---|---|
| Net income before items affecting comparability | 2020 | 2019 | 2019/20 | 2019 | |
| Net income | 60 | 94 | 287 | 321 | |
| Items affecting comparability after tax | – | – | – | – | |
| Net income before items affecting comparability | 60 | 94 | 287 | 321 | |
| Basic average number of shares (000) | 37,767 | 38,633 | 38,155 | 38,369 | |
| Basic earnings per share | 1.60 | 2.43 | 7.54 | 8.37 | |
| Basic earnings per share before items affecting comparability | 1.60 | 2.43 | 7.54 | 8.37 |
| Net debt | 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 |
|---|---|---|---|
| Pensions and similar obligations | 509 | 524 | 499 |
| Liabilities for right of use fixed assets | 99 | 103 | 85 |
| Other long term interest bearing liabilities | – | 175 | – |
| Other short term interest bearing liabilities | 1 | 5 | 1 |
| Total interest bearing liabilities | 609 | 807 | 585 |
| Cash and cash equivalents | –582 | –780 | –531 |
| Total net debt | 27 | 27 | 54 |
| Net debt, excluding pension obligations | –482 | –497 | –445 |
| Capital employed | 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 |
|---|---|---|---|
| Total assets | 2,306 | 2,543 | 2,119 |
| Interest bearing financial assets | –29 | –6 | –6 |
| Cash and cash equivalents | –582 | –780 | –531 |
| Tax assets | –186 | –171 | –171 |
| Non interest bearing assets (excl taxes) | 1,509 | 1,586 | 1,411 |
| Non interest bearing liabilities (incl taxes) | –442 | –548 | –395 |
| Tax liabilities | 113 | 127 | 110 |
| Non interest bearing liabilities (excl taxes) | –329 | –421 | –285 |
| Total capital employed | 1,180 | 1,165 | 1,126 |
| Working capital | 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 |
|---|---|---|---|
| Accounts receivable | 223 | 262 | 181 |
| Other current receivables | 60 | 69 | 62 |
| Inventory | 158 | 173 | 147 |
| Working capital assets | 441 | 504 | 390 |
| Accounts payable | –186 | –217 | –156 |
| Other current payables | –232 | –304 | –216 |
| Working capital liabilities | –418 | –521 | –372 |
| Total working capital | 23 | –17 | 18 |
| Q1/2020 | Q4/2019 | Q3/2019 | Q2/2019 | Q1/2019 | Q4/2018 | Q3/2018 | Q2/2018 | Q1/2018 | |
|---|---|---|---|---|---|---|---|---|---|
| Americas | |||||||||
| Sales, MSEK | 189 | 179 | 203 | 237 | 244 | 296 | 315 | 285 | 288 |
| Book-to-bill, % | 111 | 91 | 97 | 89 | 92 | 92 | 82 | 103 | 108 |
| Operating income before items affecting comparability, MSEK | 21 | 58 | 28 | 38 | 37 | 48 | 60 | 33 | 45 |
| Operating margin before items affecting comparability, % | 11.3 | 32.3 | 14.1 | 15.8 | 15.3 | 18.0 | 18.8 | 11.5 | 15.5 |
| Europe & RoW | |||||||||
| Sales (including Alfdex), MSEK | 336 | 334 | 320 | 383 | 394 | 345 | 367 | 388 | 379 |
| Book-to-bill, % | 85 | 103 | 91 | 88 | 97 | 108 | 97 | 94 | 106 |
| Operating income before items affecting comparability, MSEK | 68 | 80 | 63 | 84 | 90 | 81 | 84 | 94 | 77 |
| Operating margin before items affecting comparability, % | 20.2 | 24.1 | 19.7 | 22.0 | 22.8 | 23.4 | 22.9 | 24.4 | 20.2 |
| Alfdex eliminations | |||||||||
| Sales, MSEK | –69 | –83 | –60 | –67 | –73 | –59 | –60 | –70 | –64 |
| Operating income before items affecting comparability, MSEK | –2 | –4 | 1 | –1 | –1 | 7 | –2 | –1 | –1 |
| Group | |||||||||
| Sales (excluding Alfdex), MSEK | 456 | 430 | 463 | 553 | 566 | 582 | 622 | 603 | 603 |
| Book-to-bill, % | 94 | 99 | 94 | 88 | 95 | 102 | 90 | 97 | 108 |
| Operating income before items affecting comparability, MSEK | 87 | 134 | 91 | 121 | 126 | 136 | 142 | 126 | 120 |
| Operating margin before items affecting comparability, % | 19.1 | 31.1 | 19.8 | 21.9 | 22.2 | 24.8 | 22.9 | 20.9 | 19.9 |
| Basic earnings per share, SEK | 1.60 | 1.87 | 1.67 | 2.39 | 2.43 | 2.95 | 2.74 | 2.36 | 2.26 |
| Return on equity, % | 25.4 | 29.5 | 34.4 | 39.0 | 39.5 | 41.6 | 40.3 | 38.1 | 37.6 |
| Cash flow from operating activities per share, SEK | 2.15 | 1.53 | 2.53 | 3.32 | 2.65 | 3.44 | 4.17 | 3.61 | 2.80 |
| Working capital as % of annualised sales | 1.2 | 0.9 | –0.9 | –0.9 | –0.7 | –1.2 | –2.5 | –0.6 | 0.9 |
| Net debt, MSEK | 27 | 54 | 207 | 102 | 27 | 12 | 37 | 132 | 92 |
| Gearing ratio, % | 2 | 5 | 20 | 10 | 2 | 1 | 4 | 14 | 9 |
| Gearing ratio (excl Pensions), % | –38 | –39 | –44 | –38 | –42 | –49 | –43 | –35 | –38 |
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
Europe and the rest of the world operating segment comprising the Group's operations in Europe, India and China.
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.
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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