AGM 2021
Concentric’s Annual General Meeting 2021
Concentric's Annual General Meeting 2021 will be held in Stockholm on 22 April 2021.
A shareholder who wishes to have a matter addressed at the Annual General Meeting shall submit a written request to the board of directors on 4 March 2021 at the latest, or after this date but in due time for the matter to be included in the notice to attend the Annual General Meeting.
The request shall be addressed to the board of directors and sent to Marcus Whitehouse at the address: [email protected].
Shareholder Letter from CEO
Dear Shareholder
In line with best practice the Concentric management team are unable to attend this year’s Annual General Meeting as we have done in previous years due to the ongoing travel restrictions and social distancing rules imposed by national governments to restrict the spread of the Coronavirus, COVID-19.
Market Overview
Demand in 2020 for medium- and heavy-duty trucks in our core regional markets, namely Europe & North America were forecast to be lower in 2020 than 2019. Indeed, we saw the expected reduction in demand during the first quarter and the early indications of the impact the global pandemic would have on the global economy. The effects of the pandemic, started to materially impact our business in late March with many of our European & Asian OEM customers forced to cease production as national governments imposed restrictions to limit the spread of the virus. Concentric reacted quickly to the changes in customer demand reducing our cost of capacity by introducing short-time working arrangements in many of our facilities, furloughing employees or extending plant shutdowns. The team also established new sanitisation processes within our facilities ensuring our employees remained safe whilst within the work environment. Throughout the pandemic, we have focussed on our customers’ requirements, continuing to work hand in glove on new sustainable technologies and maintaining the product quality and delivery performance expected from Concentric.
Financial Performance
The CBE-programme maintained the Group’s profitability at a strong level despite a year-on-year sales reduction of 25%. The full year reported operating margin was 18.4% (23.5) and benefitted from various government employee support programs MSEK 13. The business also completed a targeted restructuring program, reducing excess capacity to right size the business whilst maintaining core business skills, particularly in the sales and engineering functions, and we believe the business is well positioned to enjoy the financial returns from the global recovery.
Cash management has also been a particular focal point during the year, and whilst cash generation was impacted by lower sales, the conversion ratio of operating income to operating cash has met our expectations. The Group’s net debt position increased to MSEK 86 (54), increasing the gearing ratio modestly to 8% (5).
The strength of the balance sheet and the liquidity of the business allowed the acquisition of Allied Enterprises (MSEK 95) to be completed from cash reserves and Concentric was able to pay a 2019 dividend to shareholders of SEK 3.25 (4.50) per share during the fourth quarter. The cash and cash equivalents at the end of the year were MSEK 505 (531), which is sufficient to both finance the day-to-day operations and room for future acquisitions.
Acquisitions
Concentric has regularly communicated our intention to improve and expand our technological capability via acquisition and Allied Enterprises, which was acquired on 31 December 2020, represents a key strategic step for Concentric. The acquisition delivers Concentric a strengthened transmission pump capability that complements our current product offering. The transmission products produced by Allied Enterprises sit neatly between our existing product categories, engines and hydraulics in terms of pressure, providing the opportunity to gain an increased market share of the global transmission market. Importantly, this range of pumps can also be adapted to be driven electronically, and therefore accelerate our growth in the strategically important CO2 neutral Battery Electric Vehicle (BEV) and Hydrogen Fuel Cell (HFC) vehicle and machine markets.
Outlook
The overall published market indices blended to Concentric’s mix of end-market applications and locations suggests the market for the full year 2021 will be up +12%, as the world’s economies continue to recover from the global pandemic. The European and North America markets forecast growth indices are similar to the overall blended growth rate whilst our emerging markets, China and India are expected to recover strongly next year. Demand for engine products continues to improve quarter-on-quarter and the recovery in the end-market applications for hydraulics products has started during the fourth quarter, we expect this to continue during 2021. Whilst the global pandemic continues there remains an element of uncertainty in our outlook, however with various Covid-19 vaccines approved and the global roll-out program underway, that level of uncertainty will reduce over time.
Customers continue to drive towards CO2 neutrality and zero emissions and Concentric has the technology and innovation to support these developments with world class e-pump solutions. We have announced a number of contract wins over the last two years with new and existing customers. The individual contracts announced are not significant in terms of near term revenue, but collectively are strategically important and we reiterate previous guidance, we expect sales of e-products could amount to as much as 20% of Group sales by 2025. We will continue to invest in people and product to support our electrification strategy, and continue the search for further acquisitions to generate inorganic revenue growth.
2020 has been a particularly difficult year, an economic crisis caused by the global pandemic and a socially challenging environment, one that has required us all to adapt to new working patterns and processes. The Concentric team has once again risen to the challenge to meet our customer’s requirements, deliver exceptional financial results and all in a safe conducive working environment.
For further financial information please refer to 2020 Annual Report which can be found at www.concentricab.com.
Yours faithfully
David Woolley
President & CEO