VBG GROUP INTERIM REPORT JANUARY–JUNE 2018 Q2 The VBG Group is an interna- tional industrial group with some 1,600 employees in 18 countries. The Parent Company VBG Group AB is a long-term owner that pro- vides active management of the Group’s four wholly owned divi- sions through considerable indus- trial expertise, a strong corporate culture and financial resilience. SEK 931 M SEK 117 M Consolidated sales increased to SEK 931.2 M (777.2) in the second quarter. Operating profit increased to SEK 117.3 M (98.5) in the second quarter.
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Q2JANUARY–JUNE 2018 VBG GROUP INTERIM REPORT · VBG GROUP INTERIM REPORT JANUARY–JUNE 2018 1 Second quarter of 2018: • Consolidated sales increased by 19.8 per cent to SEK 931.2
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VBG GROUPINTERIM REPORTJANUARY–JUNE 2018Q2
The VBG Group is an interna-tional industrial group with some 1,600 employees in 18 countries. The Parent Company VBG Group AB is a long-term owner that pro-vides active management of the Group’s four wholly owned divi-sions through considerable indus-trial expertise, a strong corporate culture and financial resilience.
SEK 931 M
SEK 117 M
Consolidated sales increased to SEK 931.2 M
(777.2) in the second quarter.
Operating profit increased to SEK 117.3 M
(98.5) in the second quarter.
VBG GROUP INTERIM REPORT JANUARY–JUNE 2018
1
Second quarter of 2018:• Consolidated sales increased by 19.8 per cent to SEK 931.2 M (777.2).• Operating profit rose to SEK 117.3 M (98.5), with a margin of 12.6 per cent (12.7).• Profit after financial items amounted to SEK 105.6 M (93.6), with a profit margin of 11.3 per cent
(12.0).• The Group’s profit after tax amounted to SEK 77.8 M (70.1).• Earnings per share1 amounted to SEK 3.11 (2.80).
First half of 2018:• Consolidated sales increased by 13.1 per cent to SEK 1,748.9 M (1,545.8).• Operating profit was SEK 222.5 M (201.2), with a margin of 12.7 per cent (13.0).• Profit after financial items amounted to SEK 191.1 M (187.8), with a profit margin of 10.9 per cent
(12.2).• The Group’s profit after tax totalled SEK 141.3 M (136.7).• Earnings per share2 amounted to SEK 5.65 (6.43).
1 The average number of shares during the second quarter was, in thousands, 25,004 (25,004).2 The average number of shares during the first half of the year was, in thousands, 25,004 (21,253).
Cash flow from operating activities 37.0 38.5 110.0 112.8 243.7
ROE (cumulative), % 13.4 15.8 13.4 15.8 12.3
Equity/assets ratio, % 53.9 51.7 53.9 51.7 54.7
Average number of employees — — 1,527 1,440 1,446
Average number of shares during the period 25,004 25,004 25,004 21,253 22,920
Number of outstanding shares 25,004 25,004 25,004 25,004 25,004
VBG GROUP INTERIM REPORT JANUARY–JUNE 2018
2
THIS IS THE VBG GROUP
VBG Group AB (publ), domiciled in Vänersborg, is the Parent
Company of an international engineering Group with wholly
owned companies in the USA, Canada, India, Brazil, China,
Australia, South Africa and nine countries in Europe. The
Group’s operations are grouped into four divisions — VBG
Truck Equipment, Edscha Trailer Systems, Mobile Climate Con-
trol and Ringfeder Power Transmission — with products that
are marketed under strong, well-known brands.
VBG Group AB’s Series B share was introduced on the stock
exchange in 1987 and is listed today on the Nasdaq Stockholm
Mid Cap list.
Vision
We are number one or two globally in the industrial niches in
which we are active. We make a difference by creating the
products and services of the future.
Business concept
The VBG Group will, within selected product and market seg-
ments, acquire, own and develop industrial companies in busi-
ness-to-business commerce with strong brands and good
growth potential. Based on a long-term commitment and with
a focus on growth and profitability, the VBG Group’s share-
holders will be offered attractive value growth.
Goals
• > 10 per cent in average annual sales growth over a five-
year period, of which 5 per cent attributable to actual
organic growth and 5 per cent to structural growth.
• > 12 per cent in average operating margin (EBIT) rolling five
years.
Strategies
The Parent Company, VBG Group AB, is responsible for the
strategic governance of the Group as a whole, which entails
the approval and follow-up of divisional targets and strategies,
providing support in the form of industrial expertise and iden-
tifying and conducting strategic acquisitions. Furthermore, the
Parent Company is responsible for allocating capital, strategic
HR and IT work and the operation of all shared IT systems.
Strategies for the divisions:
• Strong brands and leading market positions
in selected niches
• High customer value in the products
• Diversified customer base
• International expansion
Stable ownership situation
The VBG Group’s principal owners comprise three foundations
that were established by the Group’s founder, Herman Kreft-
ing. This ownership structure has historically provided a high
degree of financial stability, which in turn has resulted in solid
total returns for shareholders.
VBG GROUP IN THE WORLD
The VBG Group has 31 wholly owned companies in 16 countries and more than 1,600 employees in 18 countries worldwide.
Own companiesImporters/Agents
VBG Truck EquipmentEdscha Trailer SystemsMobile Climate ControlRingfeder Power Transmission
1,600 EMPLOYEES IN
18 COUNTRIES
VBG GROUP INTERIM REPORT JANUARY–JUNE 2018
3
SALES BY DIVISION SALES BY MARKET
Sweden, 8%
Other Nordic countries, 6%
Germany, 16%
Other European countries, 18%
North America, 45%
Brazil, 2%
Australia/New Zealand, 2%
Rest of world, 3%
VBG Truck Equipment, 27%
Edscha Trailer Systems, 10%
Mobile Climate Control, 48%
Ringfeder Power Transmission, 15%
This is the VBG Group, cont.
DIVISIONS
VBG TRUCK EQUIPMENT
By virtue of its own strong brands, the division is an interna-tionally leading supplier of coupling equipment for trucks with heavy trailers. The division accounts for more than 50 per cent of the global market via the Ringfeder and VBG brands. The division also has Onspot — automatic tyre chains with a world-leading position in its niche.
EDSCHA TRAILER SYSTEMS
By virtue of its own strong brands, the division is an interna-tionally leading supplier of sliding roofs to tarpaulin-covered trailers and tipper vehicles, as well as sliding bow roofs to rail-way wagons. The division accounts for approximately 40 per cent of the global market for sliding roofs via the Edscha Trailer Systems and Sesam brands.
BRANDS
Our divisions
RINGFEDER POWER TRANSMISSION
By virtue of its own strong brands, the division is a recognised global market leader in selected niches within mechanical power transmission and energy and shock absorption. The division’s brands are Ringfeder, Tschan, Henfel and Gerwah. The custom-ers are found in such widely disparate industrial markets as con-struction, machinery, power and mining.
MOBILE CLIMATE CONTROL
By virtue of its own strong brand, the division is an indus-try-leading supplier of complete climate control systems (HVAC systems) to commercial motor vehicles, primarily in North America and Europe. The customers are mainly found in four market segments: buses, off-road vehicles, utility vehicles and defence vehicles.
VBG Group’s main markets remain strong and we can see no
clear indications of a slowdown. The market situation is also
clearly reflected in sales by the divisions. They again reported
earnings at favourable levels and we continue to note, on the
whole, good organic growth in the Group, particularly for
Mobile Climate Control, which — with its robust growth
agenda — expanded significantly by winning market shares in
a growing market. The greatest cause for rejoicing this quarter
is, however, Edscha Trailer Systems. It is positive to now wit-
ness the real effect of the measures taken by the division.
Earnings per share in the second quarter are higher year-on-
year, though slightly lower year-on-year for the first half of the
year. This is due to the higher number of shares in the com-
pany in 2018 compared with the previous year, arising from
the new share issue in the first quarter of 2017.
VBG GROUP INTERIM REPORT JANUARY–JUNE 2018
4
FAVOURABLE ORGANIC GROWTH IN THE GROUP
The divisions have again reported earnings at favourable levels and we continue to note, on the whole, good organic growth in the Group, par-ticularly for Mobile Climate Control, which expanded significantly.
VBG GROUP INTERIM REPORT JANUARY–JUNE 2018
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VBG Truck Equipment — continued scope to build for the
future
VBG Truck Equipment’s profit for the second quarter met
expectations. The division reported healthy profitability and,
in absolute terms, a slightly better operating profit compared
with the corresponding quarter of the preceding year. Earnings
are still impacted by our investments in product development
and the digitalisation of marketing and sales, though this is
entirely according to plan. Now is the time for VBG Truck
Equipment to build for the future.
Edscha Trailer Systems — very pleasing progress
Edscha Trailer Systems noted a strong start to the year and I
am delighted to report that the highly positive development
continued in the second quarter. Profitability has not been
higher for this quarter since 2008 — shortly before the finan-
cial crisis hit. I consider the good performance as confirmation
that the measures implemented by the division to optimise
operations have been successful and that the drop in earnings
in recent years was temporary. The new management is now
well established and is working energetically with developing
the business towards continued growth and solid profitability.
Mobile Climate Control — accelerating organic growth but
unchanged profitability
Mobile Climate Control accounted for a large share of the
Group’s organic growth during the second quarter of the year.
Strong demand in the off-road vehicles and bus segments, in
combination with gains in market shares in the bus segment, is
fuelling growth in the division. Growing transport needs in
society not only increases sales of new vehicles, it also creates
higher demand for spare and wear parts, because the existing
vehicle fleet is being used extensively. This trend also notice-
ably favours Mobile Climate Control’s aftermarket business.
Taken together, this has enabled Mobile Climate Control to
report very strong sales for both this quarter and the first half
of the year. However, the growth has resulted in considerable
pressure on internal processes, primarily in “supply chain”, as
the division’s products must be adapted to new customers’
vehicles. Mobile Climate Control’s suppliers are also working
at high capacity and have sometimes found it difficult to
deliver on time, which gave rise to disruptions in production.
Therefore, the division’s profitability did not fully reach the
level I expect to see.
It is positive that a growing number of the division’s deliver-
ies are products adapted to electric vehicles, even if this busi-
ness is still relatively small. It is reassuring to see that Mobile
Climate Control is part of the electrification of the vehicle
automotive industry and is winning contracts, as we are
investing substantial resources in this area.
Ringfeder Power Transmission — as expected but with
potential for improvement
For the second quarter, Ringfeder Power Transmission pre-
sented results that were entirely as expected, both in terms of
sales and profitability. Restructuring in recent years to improve
profitability has established the division at a higher level of
profitability, though there is still potential to improve profit-
ability further. Some areas of the restructuring work are still
ongoing and I expect to see the full effect of these measures
in 2019.
VBG GROUP INTERIM REPORT JANUARY–JUNE 2018
6
GROUP TREND
Sales and earnings
Second quarter of 2018
Sales of SEK 931.2 M (777.2) were 19.8 per cent higher com-
pared with the second quarter of 2017. Adjusted for move-
ments in exchange rates between the quarters, the actual
organic growth was 18.0 per cent.
The Group’s operating profit increased to SEK 117.3 M
(98.5), with an operating margin of 12.6 per cent (12.7).
Operating profit included Group-wide overheads of SEK 6.5 M
(6.0) that are not allocated to the divisions.
Net interest expense was SEK 8.6 M (expense: 10.8) and the
quarter’s currency effect on foreign-currency denominated
credits was a negative SEK 3.2 M (pos: 5.9). Taken together,
this resulted in a net financial expense of SEK 11.8 M (expense:
4.9). Accordingly, profit after financial items amounted to SEK
105.6 M (93.6). Profit after tax totalled SEK 77.8 M (70.1) and
earnings per share amounted to SEK 3.11 (2.80).
First half of 2018
Sales of SEK 1,748.9 M (1,545.8) were 13.1 per cent higher
year-on-year. Actual organic volume growth was 12.7 per cent
after adjustment for exchange rate changes between the six-
month periods.
Operating profit amounted to SEK 222.5 M (201.2), with an
operating margin of 12.7 per cent (13.0). The operating profit
included Group-wide overheads in the Parent Company of SEK
9.4 M (10.3) that were not allocated to the divisions.
The Group’s net interest expense for the first half of the
year was SEK 17.3 M (expense: 23.3) and the first half of the
year’s currency effect on foreign-currency denominated cred-
NET SALES, SEK M PROFIT/LOSS AFTER FINANCIAL ITEMS, SEK M
1 Negative SEK 7.9 M in costs attributable to the acquisition of Mobile Climate Control, and negative SEK 4.8 M pertaining to costs for an action programme to increase profitability in Ringfeder Power Transmission.2 Negative SEK 7.5 M in reorganisation costs relating to Edscha Trailer Systems pertaining to measures to increase profitability.
VBG GROUP INTERIM REPORT JANUARY–JUNE 2018
7
its was a negative SEK 14.1 M (pos: 9.9). Taken together, this
resulted in a net financial expense of SEK 31.4 M (expense:
13.4). Profit after financial items was, accordingly, SEK
191.1 M (187.8), profit after tax totalled SEK 141.1 M (136.7)
and earnings per share amounted to SEK 5.65 (6.43).
For the first six months of the year, return on capital
employed was 14.1 per cent (11.0) and return on equity was
13.4 per cent (15.8). The Group’s equity/assets ratio declined
slightly to 53.9 per cent (54.7 at year-end).
Capital expenditures
The Group’s new capital expenditures during the second
quarter amounted to SEK 20.7 M (19.3), while total new capi-
tal expenditures for the first half of the year amounted to SEK
29.3 M (26.6).
Financial position
Profit after tax for the first six months of the year amounted to
SEK 141.3 M (136.7). Other comprehensive income during the
first half of the year amounted to a profit of SEK 49.4 M (loss:
28.0), corresponding to total comprehensive income of SEK
190.7 M (108.7).
After the payment of dividends totalling SEK 81.3 M (43.8)
to the shareholders, equity amounted to SEK 2,114.3 M at 30
June (2,004.9 at year-end). The equity/assets ratio was 53.9
per cent at 30 June (54.7 at year-end). In June, a total of SEK
40 M was paid off for bank loans in SEK and USD. The
Group’s cash and cash equivalents declined by SEK 34.5 M
during the first six months to SEK 286.9 M at 30 June (321.4
at year-end). In addition, there were unutilised overdraft facili-
ties of SEK 100.0 M, which means the Group at the end of
June had available liquidity of SEK 386.9 M (421.4).
The Group’s interest-bearing net debt (including pension lia-
bility) increased by SEK 32.2 M, amounting to SEK 774.5 M at
30 June (742.3).
The ratio of interest-bearing net debt to equity was 0.37 at
30 June 2018 (0.37 at 31 December 2017) and the ratio of net
debt to consolidated operating profit before depreciation/
amortisation and impairment (EBITDA) was 1.72 (1.73).
The Group’s goodwill increased by SEK 12.4 M due to cur-
rency effects and amounted at the end of June to SEK
1,131.3 M (1,118.9 at year-end), which in relation to equity
amounted to a ratio of 0.54 (0.56).
Cash flow
Cash flow from operating activities during the first half of
the year amounted to SEK 110.0 M (112.8). Paid new capital
expenditures during the period amounted to SEK 28.0 M
(26.6). During the first half of the year, dividends totalling SEK
81.3 M (43.8) were paid to the shareholders and the Group’s
total non-current and current financial liabilities declined SEK
38.1 M (65.5 net after the new share issue was implemented
in first quarter of 2017), which resulted in a negative cash flow
from financing activities of SEK 119.4 M (neg: 109.3). Conse-
quently, net cash flow for the period was a negative amount
of SEK 37.4 M (neg: 23.1).
Personnel
At 30 June 2018, there were 1,606 employees in the VBG
Group (1,502 at year-end), of which 216 (211) in Sweden.
During the first half of the year, the Group employed an aver-
age of 1,527 persons (1,440 during the year-earlier period).
Of these 1,527 employees, 216 (182) were active in Sweden.
The cost of salaries and social security contributions was SEK
394.1 M (365.0).
Per share data
Earnings per share for the first half of the year amounted to
SEK 5.65 (6.43), and the reduction was due to the fact that
the average number of shares for the first half of the year was
25,004,048 compared with 21,253,424 shares during the
same period one year earlier.
Equity per share (total outstanding shares at the end of the
period) was SEK 84.56 at 30 June 2018, compared with SEK
74.75 at the same time last year and SEK 80.18 at year-end.
The number of shareholders increased by 116 in the second
quarter and amounted to 4,600 at 30 June (4,670 at year-
Interest-bearing net debt 774.5 n/a 874.0 n/a 742.3
VBG GROUP INTERIM REPORT JANUARY–JUNE 2018
26
EBITDA
Operating profit before amortisation and impairment and property, plant and equipment.Group, SEK M 6 months 2018 Q2 2018 6 months 2017 Q2 2017 Full-year 2017
Operating profit before amortisation and impairment of intangible assets.Group, SEK M 6 months 2018 Q2 2018 6 months 2017 Q2 2017 Full-year 2017
Operating profit 222.5 117.3 201.2 98.5 351.1
Amortisation of intangible assets 15.9 8.0 15.9 8.0 31.7
EBITA 238.3 125.3 217.1 106.4 382.8
INTEREST-BEARING NET DEBT/EBITDA
Interest-bearing net debt in proportion to operating profit before depreciation/amortisation and impairment.Group, SEK M 6 months 2018 Q2 2018 6 months 2017 Q2 2017 Full-year 2017
Interest-bearing net debt 774.5 874.0 742.3
EBITDA, rolling four quarter 450.5 350.3 428.3
Interest-bearing net debt/EBITDA 1.72 n/a 2.49 n/a 1.73
PROFIT MARGIN
Profit after financial items as a percentage of net sales.Group, SEK M 6 months 2018 Q2 2018 6 months 2017 Q2 2017 Full-year 2017
Net sales 1,748.9 931.2 1,545.8 777.2 3,002.0
Profit after financial items 191.1 105.6 187.8 93.6 315.6
Profit margin, % 10.9 11.3 12.2 12.0 10.5
VBG GROUP INTERIM REPORT JANUARY–JUNE 2018
27
IndiaMOBILE CLIMATE CONTROL THERMAL SYSTEMS INDIA PVT. LTD.Plot No. 4BRoad No.2, Phase-IKIADB Industrial Area NarasapuraKolar – 56313, Karnataka
BrazilMCC DO BRASIL LTDARua Silverio Finamore, 920-Gp 3Louveira- SP, 13.290-000Tel +55 19 3878 2058
RINGFEDER POWER TRANSMISSION
GermanyRINGFEDER POWER TRANSMISSION GMBHWerner-Heisenberg-Straße 18 DE-64823 Groß-UmstadtTel +49 6078-9385-0