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22 October 2020, 08:00
Sdiptech AB (publ) publishes interim report for the third quarter (July – September) 2020
The report will be available on the company's website: www.sdiptech.se
SDIPTECH IS GOING STRONG IN AN UNCERTAIN MARKET
JULY – SEPTEMBER 2020
FIRST NINE MONTHS 2020
COMMENTS BY THE CEO:
SDIPTECH IS GOING STRONG IN AN UNCERTAIN MARKET
The year has continued to be characterized by a troubled world. Despite this, the first nine months of 2020 have been strong for Sdiptech. Our overall goal is to increase profits through both organic growth and acquisitions. During the past three quarters, EBITA* profit increased by a total of 38.0 percent, of which 17.8 percent was organic, 21.0 percent from acquisitions and -0.8 percent from currency effects. In addition, the EBITA* margin has been strengthened by three percentage points to 16.6 (13.6) percent. Cash flow generation amounted to 99.1 (108.9) percent and earnings per share increased to SEK 5.16 (3.22).
QUARTER – Strong end to an already stable quarter
There are still uncertainties about how long the current pandemic will last, and how its impacts may affect our society. However, its effect on Sdiptech's operations remains limited, which is related to our role as a provider of solutions to critical infrastructure needs. Several of our operations have begun to catch up on delayed orders, and during the end of the quarter most of our business units delivered according to plan or over. This has resulted in us being able to increase our delivery levels compared to last year, corresponding to an organic sales increase of 8.2 percent, excluding currency effects.
The Group showed very strong organic EBITA* growth of 18.6 percent during the quarter, without currency effects. An important reason for this profit growth is the extra high delivery levels in the quarter when delayed orders are catching up. When this happens in business units with scalable business models, the sales increase has a clear result effect on the bottom line. Another reason is that a large part of the cost savings that were implemented in the spring remains. Our business units were cost-effective even before the pandemic, but as in all crises, unnecessary expenses and structures are identified, which is why measures linked to these will be permanent. However, other investments that have been paused but are assessed as long-term value-creation, will be resumed as soon as possible. Overall, we still have extra high profitability, resulting in operating margins during the period, which should not be considered as permanent.
ACQUISITIONS - Welcome Alerter Group
During the quarter, we acquired Alerter Group Ltd, which is our sixth business unit in the UK. Alerter Group specializes in radio-based fire alarm systems for the deaf and hard of hearing, radio-based emergency rescue systems, and other adaptable communication systems for so-called high-risk workplaces. Their main customers are schools and universities. With the help of Alerter Group's communication system, people with disabilities have a faster and safer opportunity to get out of a building, which can be a decisive factor when there is a fire.
In addition, we have completed the divestment of the Support Operation, which provided administrative services in areas such as law, acquisitions and marketing communications and which until the spring of 2018 was owned by Sdiptech. Subsequently, and as part of the strategic refinement of Sdiptech's core business towards products and services for critical infrastructure needs, Sdiptech divested its holding. The deal included a number of additional purchase payments that were realized during the third quarter of 2020.
OUTLOOK – Increased drivers for investments in sustainable infrastructure
With the threat of a second pandemic wave and an American presidential election around the corner, there is much to suggest that the remaining months of the year will continue to be marked by uncertainties in the world. Despite this, we are optimistic. In connection with the restart of the economy, we are seeing new efforts and a completely new will to move towards a more sustainable society. Infrastructure has a given role in this change. For example, too little is still invested in infrastructure for municipal water and sewage supply. There is a great need for renewal, climate adaptation and upgrading of pipe networks and waterworks that must be able to cope with increased capacity and environmental requirements. There is also a large waste of heat where large proportions of the energy required to heat our properties leak out. We also have a shortage of capacity in the electricity grid networks and most regions have delivery problems to an increased supply need. There is thus a great need to invest more in sustainable infrastructure, not least in water, energy and transport - three capital-intensive areas that are central to society's long-term welfare and growth.
Sdiptech's margin strengthening, which has been going on for a long time, continues. Partly organic, as a result of our focus on building strong market positions, partly as a result of positive margin additions from acquisitions. This has previously been particularly clear in Special Infrastructure Solutions, but also applies to Water & Energy. At the same time and as mentioned earlier, there is a high level of profitability given the extra high delivery right now, but also due to temporary savings that have lasted a little longer than we previously anticipated. With all this in mind, we increase the guidance for the EBITA* margin for Special Infrastructure Solutions from 22–25 percent to 28–30 percent for the full year 2020, and for Water & Energy from 17–20 percent to 19–21 percent for the full year 2020.
In summary, Sdiptech is doing well through this uncertain 2020 and we have a strong belief in our business model and the driving force that underlines the demand in our operations' offerings. So far this year, the Group has shown organic profit growth of 17.8 percent and the goal of profit growth of 5–10 percent will in all probability be exceeded for the full year. Regarding acquisitions, we have so far bought companies corresponding to SEK 37 million EBITA. However, we have a solid pipeline, and we are sticking to our goal of acquiring SEK 90 million in added EBITA in 2020.
Finally, I would like to extend a big thank you for the trust to our 1,515 new shareholders that were added during the third quarter. And it is exciting that we have more than doubled the number of shareholders in one year. In addition, I would like to thank all our dedicated employees for your commitment and strong efforts that continue to show fantastic leadership and business acumen.
President and CEO
For additional information, please contact:
Sdiptech's common share of series B share is traded under the short name SDIP B with ISIN code SE0003756758. Sdiptech AB's preferred shares are traded under the short name SDIP PREF with ISIN code SE0006758348. Sdiptech AB's Certified Adviser at Nasdaq First North Premier Growth Market is Erik Penser Bank, +468-463 83 00, email@example.com. Further information is available on the company's website: www.sdiptech.se
Sdiptech AB is a technology group with a primary focus on infrastructure segments critical to well-functioning societies and to welfare, e.g. water & sanitation, power & energy, transportation, energy efficiency and air climate. As part of our offering in urban areas, we also provide niched technical services for buildings and real-estate such as renovation of elevators and roofs. The company has approximately SEK 2,000 million in sales and is based in Stockholm.
Sdiptech AB (publ) is required to disclose this information pursuant to EU Market Use Regulation 596/2014. The company is based in Stockholm. The information was provided by the above contact person for publication 22 October 2020 at 08:00 CEST.