AQ Group AB (publ): Year-end report 2018
Fourth quarter, October-December 2018
in brief
- Continued good growth both organically and through acquisitions
- Net sales increased by 19.6% to SEK 1 216 million (1 017)
- Operating profit (EBIT) increased by 47.8 % to SEK 57 million (39)
- Profit after financial items (EBT) increased by 67.5 % to SEK 53 million (32)
- Profit margin before tax (EBT %) was 4.4 % (3.1)
- Profit margin before tax (EBT %) adjusted for items affecting comparability was 5 % (3.1)
- Cash flow from operating activities increased to SEK 41 million (-11)
- Earnings per share after tax increased by 166 % to SEK 2.58 SEK (0.97)
- Equity ratio 58 % (61)
Full year 2018 in brief
- Continued good growth both organically and through acquisitions.
- Net sales increased by 16.1% to SEK 4 667 million (4 020)
- Measures implemented to restructure three subsidiaries with performance problems
- Operating profit (EBIT) decreased by 20.9 % to SEK 208 million (263)
- Profit after financial items (EBT) decreased by 22.5 % to SEK 198 million (256)
- Profit margin before tax (EBT %) was 4.2 % (6.4)
- Profit margin before tax (EBT %) adjusted for items affecting comparability was 5.8 % (6.4)
- Cash flow from operating activities increased by 7.4 % to SEK 151 million (140)
- Equity ratio 58 % (61)
- Earnings per share after tax decreased by 25.9 % to SEK 8.26 SEK (11.14)
- The Board of Directors proposes a dividend of SEK 2.75 (2.75)
A word from the CEO
Fourth quarter
AQ Group grows 19.6 % and increases earnings before taxes (EBT) with 67 % in the quarter. The profit improvement comes mainly from higher invoicing in many of our companies. At the same time, the profit margin before tax of 4.4% is squeezed by few production days in December and some closing costs in our restructuring projects. We also have higher depreciation for obsolescence than usual. We are below our target level of 8% and we are not satisfied.
Market
AQ Group has a broad customer base with 3 000 OEM companies. Our growth comes from both existing and new customers. Segments that have contributed well to growth include electrification, public transport, infrastructure and marine environmental technology. Demand for components for commercial vehicles has been strong and AQ has increased deliveries to both trains, buses and construction equipment. Several customers who make equipment for material handling and logistics have had a good year.
AQ's combination of being a major supplier to both vehicles, electricity and automation means that we are a natural partner for many of the projects that are currently underway in electromobility.
Full year
AQ Group's growth for the year is 16.1% and profit margin before tax is 4.2%. The operating profit trend has been unsatisfactory in both 2018 and 2017. To rectify this, we have carried out three major restructuring projects during the year that have affected the profit margin.
Our manufacturing unit in Thailand is closed and production is moved to China. The business of the subsidiary that was put into bankruptcy is now being driven by a new owner. The relocation of production in AQ Welded structures to other subsidiaries has largely been completed, but some remain to be done during the first half of 2019.
The costs affecting comparability is reported in Note 5. In addition, we have had operational losses in AQ Segerström & Svensson of SEK 28.8 million and a further SEK 29.0 million for AQ Welded structures and AQ Thailand together. There has been a lot of work on our restructuring during the year and we are now entering 2019 with better opportunities to achieve our goals.
The Board's proposal for a dividend of SEK 2.75 per share is at the same level as last year.
Supply capability
In AQ Group, we work intensively in all our companies to become an even better supplier to demanding industrial customers. We are aware that during the past year of strong growth, we have not lived up to some of our customers' expectations on especially delivery reliability. The reasons for this are many, but we are working hard to improve routines, standards and processes to become even more robust and flexible in the future.
Cash flow
It is gratifying that the increase in inventories and accounts receivable has stopped during the fourth quarter despite continued strong growth. We see a good effect of the inventory reduction projects we have carried out on two units and are now continuing with this at two other factories. However, we are dissatisfied with the development of short overdue accounts receivable in the quarter and have initiated several measures to improve this.
Organization
AQ Group has a strong culture with core values that are real, in customer focus, entrepreneurship, simplicity, cost efficiency, courage and respect. We run our business in decentralized companies with talented leaders and employees who work close to their customers and have a mandate to run the business. In this way, we can be quick and utilize all the opportunities available in the market. This is a strategy we will continue with.
Acquisitions
The integration of our two acquisitions during the year, Mecanova and B3CG, continued during the quarter. For example, we have created a new joint manufacturing unit in Pärnu, Estonia with additional capacity. We have also made progress in expanding B3CG's customer base in North America.
Acquisitions continue to be a very important part of AQ's strategy. We continuously evaluate suitable acquisition opportunities to strengthen both our offering, profitability and geographical presence. A central part of our acquisition strategy is also to follow important major customers into new countries something that we, for example, did in connection with the acquisition of B3CG.
Outlook
Our guideline is to be a long-term, stable, growing and profitable group with a profit margin (EBT) of 8% and a strong financial position. We like to do business with the customer in focus. Our employees and managers are doing a good job and it will also be reflected in new business in the future.
With strong relationships with world-leading customers and committed employees, we will work hard with new acquisitions, continued organic growth, good cash flow and a stable profit level. A continued important part of this is our core values and our efforts to be a long-term and "Reliable" supplier to leading industrial customers.
Anders Carlsson
CEO
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For further information, please contact:
Anders Carlsson, CEO, +46 70 513 42 99 or CFO, Mia Tomczak, telephone +46 70-833 00 80
AQ Group is required to make the information in this press release public in accordance with the EU Market Abuse Regulation. The information was released by CEO Anders Carlsson for publication at 08:00 hours CET on February 21, 2019.
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AQ in brief
AQ is a leading supplier to demanding industrial customers and is listed on Nasdaq Stockholm’s main market.
The Group consists mainly of operating companies each of which develop their special skills and in cooperation with other companies, provides cost effective solutions in close cooperation with the customer.
The Group headquarter is in Västerås, Sweden. AQ has, on December 31, 2018, in total about 6,100 employees in Sweden, Bulgaria, China, Estonia, Hungary, India, Italy, Lithuania, Mexico, Poland, Serbia, Finland, Canada and USA.
In 2018 AQ had net sales of SEK 4.7 billion and the group has since its start in 1994 shown profit every quarter.
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