Gunnebo Group – Q4 Report 2019
Published on February 7, 2020 at 8:01 AM CET.
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Steady Underlying Improvements During a Year of Change
Performance for the Quarter
We have now left 2019 behind, which was an eventful year for Gunnebo. The Business Unit structure was finalised, and our regional organisations were phased out. I also communicated the implementation of a smaller, more focused management team. The feedback from our customers on the new organisation has been positive, and employee surveys show increased engagement from our employees. We closed the acquisition of Cominfo and integrated the business into Entrance Control, launched a cost efficiency programme in July 2019 – which is now being realised according to plan and will take full effect from the second half of 2020 – and carried out a rights issue, which contributed MSEK 351 in the third quarter.
Comments on the fourth quarter and the full year
In the fourth quarter, we noticed a weakening in the market. The Group’s order intake fell by 13% compared with the corresponding quarter last year in constant currencies. Sales continued to grow in the fourth quarter, +3% in constant currencies, and we ended the year with a better order book than last year. We are keeping a close eye on the order intake trend and have taken measures to ensure a proper customer focus. We are also aware that the phasing of contracts may affect the comparison between quarters. Cash flow was strong in the fourth quarter due to positive effects from capital employed.
For the full year, we reported net growth in both order intake and net sales, of 2% and 3%, respectively, in constant currencies.
The Group’s EBITA for the fourth quarter was in line with the previous year, at MSEK 109 (110), resulting in a margin of 7.2% (7.7). The Group’s reported EBITA for the full year was MSEK 321 (334), resulting in a margin of 5.9% (6.5). Even if this is far from satisfactory, it is still a decent result, considering all ongoing changes.
We ended the year with a net debt/EBITA of 3.0 (3.5), an improvement with 0.2 from the third quarter, and generated a free cash flow of MSEK 197 (124) mainly due to focus on our working capital.
Development per Business Unit
Entrance Control had a strong year with an increase of 29% in order intake and a rise in net sales of 21% in constant currencies. The integration of Cominfo goes according to plan, and the expected synergies have been confirmed. Entrance Control keeps growing with innovative solutions in the Mass Transit segment and several new orders have been won in the Airports segment. This has been possible due to our ability to deliver global projects with large volumes and excellent quality.
Safe Storage reported an increase in order intake of 2% for the full year and sales grew by 6% in constant currencies. As part of the cost efficiency programme, the Business Unit will continue reviewing the cost structure in Europe. Safe Storage has begun its journey to changing its route-to-market in Europe to a partnership model. In parallel, market testing of new, innovative, products aimed at driving growth is now ongoing in several customer segments. We expect some of these projects to contribute to sales already in 2020.
Cash Management ended a challenging year with a decline in sales while investments continued in product development and new sales channels. For the full year, order intake fell by 15% and net sales fell by 9% in constant currencies. A stronger cost focus and the expected increase in sales of newly launched products set the stage for increased sales and improved margins ahead. Cash Management has launched several innovative products and pieces of software over the year. In 2020, the Business Unit presented a partnership with Loomis in the US, for which we developed both hardware and software for Titan Z, Loomis’ new retail solution for cash deposits. This shows that we have the expertise and capacity required to develop and deliver hardware and software solutions to global partners.
Integrated Security is a portfolio of local business operations that just ended a weak 2019 with a 7% decline in order intake and 6% decline in net sales in constant currencies. Profitability improved over the year but has not reached a satisfactory level.
In the ongoing strategic review customer and product synergies have been identified with other Business Units. This means that approximately 20% of the business operations will be merged into Safe Storage and Entrance Control in 2020. At the same time, the Business Unit will change name to Other Business, which better reflects the Business Unit’s diversified operations. The new reporting structure and historical key ratios will be presented in the first quarter of 2020. The strategic review of the remaining business operations in Other Business will continue.
As a consequence of the strategic review, items affecting comparability and an impairment totalling MSEK -56 were linked to the Business Unit in the fourth quarter.
In focus 2020
As newly appointed President & CEO, I can see how Gunnebo’s employees, products, brand portfolio and international market presence will allow us to grow our sales while improving profitability in the coming years. We are active in exciting market segments and geographic markets with an annual growth rate ranging from 3% to 6%. The Cominfo acquisition shows Gunnebo’s capability to further strengthen our market position through acquisitions. While addressing cost levels, we continue investing in innovation – the key to long-term growth. Therefore I consider it very positive that the Board unanimously decided to propose to the Annual General Meeting to not pay any dividend for the 2019 fiscal year. This shows that our main owners are fully behind and support our continued profitable growth.
I am convinced that in 2020, Gunnebo will see positive effects of the change. I look forward to managing this change project together with the executive team and the group's employees, with our sights set on profitable growth.