Kitron Asa · OSL:KIT
Kitron Asa — Investor Presentation (March 2020)
35 slides from Kitron Asa's investor presentation, Mar 18, 2020
Slide 1: Capital Markets Presentation
Capital Markets Presentation Kitron Group | 2020.03.18
Slide 2: Disclaimer
Disclaimer This presentation contains certain forward-looking information and statements. Such forward-looking information and statements are based on the current, estimates and projections of the Company or assumptions based on information currently available to the Company. Such forward-looking in
Slide 3: Agenda
AGENDA Strategy Market & Operations Financials Covid-19 Summary Peter Nilsson Israel Losada Salvador Cathrin Nylander 3 President & CEO COO and Sales Director CFO
Slide 4: Strategy
Strategy
Slide 5: The essence of Kitron
The essence of Kitron Kitron is a leading Scandinavian Electronics Manufacturing Services company, delivering improved flexibility, cost efficiency, and innovation power throughout the value chain. 5
Slide 6: Complex, high-margin products, medium volumes
Complex, high-margin products, medium volumes Margin/complexity Local niche providers High-volume, low-margin providers Volume 6
Slide 7: Kitron on three continents
Kitron on three continents 7 7
Slide 8: Strategic Horizon towards 2025
Strategic Horizon towards 2025 2015 2020 2025 Significant Refining changes Overall strategy: Complex, high-margin products, medium volumes Growth Operations M&A Growth, existing customers Capacity expansion Value chain expansion Growth, new customers Operational excellence Entering new g
Slide 9: Growth and margin improvement on track towards 2025 targets
Growth and margin improvement on track towards 2025 targets Organic growth target 2020 of NOK 3 000 million achieved in 2019 Revenue 5,000 EBIT margin 7.0 % 6.1 % 3,299 Organic 2020 target 1,632 1.5 % 2013 2014 2015 2016 2017 2018 2019 2020 2025 2013 2014 2015 2016 2017 2018 2019 2020 2025 2020 guid
Slide 10: Main financial ambitions
Main financial ambitions 2020 2025 Revenue NOK 3.3–3.7 billion Revenue NOK 5 billion EBIT margin 6.4%–7.0% M&A adding upside ROOC 20–25% EBIT margin 7% ROOC 25% 10 10
Slide 11: Market
Market
Slide 12: The European EMS Industry
The European EMS Industry A few big players, long tail of small, local firms Number of Sales from each Ongoing consolidation Companies group (Euro Billions) o Within Europe Group 1 12 Global €16.4 B o Chinese entrants Entry barriers driven by defence, Group 2 aerospace and medical, 25 Multinat
Slide 13: Customers and market sectors
Customers and market sectors ENERGY/TELECOMS DEFENCE/AEROSPACE OFFSHORE/MARINE MEDICAL DEVICES INDUSTRY 13 13
Slide 14: Three growth opportunities for Kitron
Three growth opportunities for Kitron Long-term Broad-based Internet of Things outsourcing trend move to drives product continues electrification connectivity 14
Slide 15: Operations
Operations
Slide 16: Modern, highly automated facilities with advanced certifications
Modern, highly automated facilities with advanced certifications 2019 Feb-19 - Completed the Jun-19 - Doubled the size Oct-19 – Started operating acquisition of API of our plant in Ningbo – new facility in Grudziadz – Technologies in Windber China. 4,300 sqm Poland. 8,500 sqm (PA) – USA. 10,00
Slide 17: M&A: Ongoing industry consolidation creates M&A opportunities
M&A Ongoing industry consolidation creates M&A opportunities Actively evaluating opportunities Revenue range €10–100 million Must see potential for same profitability as rest of group But time lag while optimizing to be expected Existing geography New geography Transactions most likely fin
Slide 18: Financials
Financials
Slide 19: Growth beyond 2020: "5 in 25"
Growth beyond 2020: “5 in 25” 2020 Revenue 5000 2020 Organic growth target of NOK 3 billion achieved in 2019 Revenue growth continues according to strategy Organic 2020 target 3299 2025 Organic ambition: NOK 5 billion 1632 Annual organic trend growth 2020–2025: approximately 10% M&A adds p
Slide 20: EBIT growth continues, margin expected to modestly increase, then stabilize
EBIT growth continues, margin expected to modestly increase, then stabilize 2020 2025 Operational improvement continued Target 7% but with an upside ambition 2019 affected by Poland startup and ramp-ups Acquired businesses or start-ups may of new customers temporarily be below margin ambitio
Slide 21: Capital efficiency: Temporary setback, ambitions maintained
Capital efficiency: Temporary setback, ambitions maintained Net working capital Cash conversion cycle 32% 100 102 29% 20% NOK million 942 50 522 2013 2014 2015 2016 2017 2018 2019 2020 2025 2013 2014 2015 2016 2017 2018 2019 2020 2025 Net working capital NWC as % of revenue Target NWC 20% of reven
Slide 22: Improving return on capital
Improving return on capital Higher EBIT, temporary balance sheet Return on operating capital expansion 25% Improvement expected to continue: Higher profit Capital efficiency 15% IFRS 16 affects ROOC negatively in 2019 with approximately 1.5 %-points 5% Long-term target 25% 2013 2014 2015
Slide 23: Cash flow rebounding, normal capex stable as percentage of revenue
Cash flow rebounding, normal capex stable as percentage of revenue Strong underlying operating cash flow trend Operating cash flow Temporary increase of inventory to handle component shortages starting in 2018 and 195 continued into 2019 Normal capex expected to be approximately 2-3% of revenu
Slide 24: Solid financial platform
Solid financial platform Net interest-bearing debt NOK 784 million NIBD/EBITDA NOK 650 million excl. IFRS 16 Cash & cash equivalents 204 NIBD/EBITDA 2.8 Long term debt to credit institutions 166 4.4 2.4 excl. IFRS16 Lease Liability IFRS16 116 Long term debt - Financial leasing 50 Net geari
Slide 25: Strong dividend history
Strong dividend history Strong commitment to dividends Proposed for 2019: Earnings and dividends 72 Ordinary dividend NOK 0.50 per share 63 57 50 42 43 40 NOK 1/100 35 “Kitron’s dividend policy is to pay out an annual dividend 25 21 20 of at least 50 % of the company’s consolidated net profit
Slide 26: Then 2014 and now 2019
Then 2014 and now 2019 Revenue EBIT margin Employees Market cap Enterprise 3,299 6.1 % 1,722 value 1,970 2,754 1,196 1,751 1.7 % 618 294 2014 2019 2014 2019 2014 2019 2014 2019 2014 2019 CAGR 14% CAGR 46%* CAGR 46% CAGR 38% * Measured as EBIT growth in NOK. Financial figures in NOK million. Market c
Slide 27: Covid-19 situation
Covid-19 situation
Slide 28: Covid-19 situation
Covid-19 situation We are following international and national advice from the health organisations and authorities To date, no knowledge of Kitron’s employees worldwide have been infected We're asking all of our employees, to take appropriate preventative measures. This includes keeping safet
Slide 29: Covid-19 situation
Covid-19 situation All our factories are up and running without constraints to capacity We have been working closely with our suppliers to avoid any mayor disruption to our operations o All tier-1 suppliers in China have re-started operations, gradually increasing capacity. o So far no major dis
Slide 30: Covid-19 situation
Covid-19 situation Going forward o Demand fluctuations • Kitron continuously makes capacity adjustments based on demand fluctuations but are now preparing for significantly larger fluctuations, if they should occur • Customers are asked to convert forecast to fixed and firm orders • We see strengt
Slide 31: Summary
Summary
Slide 32: Progressing on path set out towards 2025
Summary Progressing on path set out towards 2025 Maintain strategy and financial ambitions for 2025 Several growth opportunities identified So far, demand supports current revenue outlook for 2020, but Covid-19 adds uncertainty 32 32
Slide 33: Thank You!
Thank You!
Slide 34: Appendix
Appendix
Slide 35: Appendix: Definition of alternative performance measures
Appendix: Definition of alternative performance measures Order backlog Return on operating capital (ROOC) R3 % Cash conversion cycle (CCC) R3 All firm orders and 4 months of committed customers forecast at (Last 3 months Operating profit (EBIT))*4 /(Last 3 months Operating Days of inventory outstand