Etteplan Oyj
OMXH:ETTE
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
10.2
14.8
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Welcome to this webcast presentation for Etteplan's Q1 Results for '21. My name is Juha Näkki. I'm the President and CEO. And together with me for the Q&A session later in the presentation will be our CFO, Per-Anders Gådin also so you will be able to direct questions to him as well. As we have gotten used to how. We will go about in this order. So we will first start with the highlights of the quarter. We'll look a little bit more in detail also to the financial development of the company. We'll look a little bit on how we did against our targets. And after these presentation parts, we will have the Q&A session, where you will be able to ask questions. But if I kick off with the highlights of Q1. So of course, we were very pleased that we were able to return back to growth after, let's say, a difficult year last year with the COVID endemic. And if we look at the start of the year, we, of course, started with a disadvantage compared to the comparison period, which was relatively normal. And we had about 5% less employees to start with. And we also had 165 employees on temporary layoff, which was the starting point for us compared to last year. Nevertheless, we were able to progress during the quarter. And with the help of the TekPartner acquisition, we were able to turn our revenue development back to growth slightly but still back to growth, and we expect that to continue going forward. We were also pleased with the profitability of the business. We were able to exceed our target levels in all our service areas again, and we were improving clearly against the comparison period. Of course, the good development was backed up by the good development in the market. The market situation and the demand situation was improving in all the markets. And we still see some effects from the pandemic having an impact in the market. But still, overall, the market demand was developing favorably, and we also expect this development to continue. Perhaps the most significant difference compared to the comparison period there was in China, where in Q1, we, of course, had the biggest impact of the pandemic. And for this reason, it was relatively easy to beat the comparison numbers, but we did that by a very high margin of 121%. But overall also in China, we were progressing nicely with our business, and the demand situation was good. We have also now started to resume the investments into our strategy execution. So we have continued the development of our service offering and moved forward certain development programs that we have here within the company. And we will continue to -- as the market conditions are improving, we will continue to invest more into our strategy execution. And by doing that, we expect to accelerate our growth going forward. On the negative side, the organic growth was still negative, slightly, of course, affected by the fact that we had 1 day less in this quarter compared to last year but still on a negative number. So that is something where we can still improve. And if we look at the operating environment. So as I said, still the COVID pandemic is having an impact on the demand, but we can clearly see that our customers are moving in a better direction. The orders received for our customers are growing mostly, and this has then given, again, confidence to accelerate investments in product development and into production, which is driving up demand for us. And of course, we expect this trend to continue. Now we see that different countries and different societies are opening up a little bit or at least there is a positive signs for opening up the economies and, of course, with a lot of economic support by different governments into the growth. So we expect this kind of positive trend to continue during the year. Still, customer-specific differences are considerable. So some customers are doing really well already now, and still some customers are still suffering a little bit from the pandemic and the situation from last year. But overall, the development is positive. If we look at the different countries a little bit more in detail. So in Europe, pretty much all countries are developing favorably. In Finland, the recovery -- clear recovery in the market, which started in the last quarter of last year, has continued. And we see favorable development in Sweden and Denmark. Demand is continuing to develop and well. And in Netherlands, in Central Europe, Netherlands, Germany, Poland, for us, the market is -- development is positive. So overall, the situation in Europe is quite good. And in China, the market situation is already really good, and there are no effects from the pandemic in China any more visible. And of course, as mentioned in the comparison period, we had the most difficult period of the pandemic in China. So overall, good development. And as said, we expect it to continue throughout the year. If we look at the numbers a little bit more in detail. So the revenue split by service area was by Engineering Solutions, 57%; Software and Embedded Solutions at 26%; and Technical Documentation Solutions at 17%. By country, Finland was at 57%; Scandinavia, which is now a new term for us including Denmark as a new country and Sweden, was 24%; Central Europe, 15%; and China, 4%. And personnel by country, Finland, 58%; Scandinavia, 18%; Central Europe, 13%; and China 11%. And then if we look at the numbers a little bit more. So revenue growth was -- sorry. Now the right one. Yes, revenue growth was -- sorry. Now this is moving a bit. Yes, this one. So revenue by customer segment. So the industrial machinery and equipment was at 15%, the largest one, and there were no major changes in the others except for forest pulp and paper dropping slightly by 2% to the third place with 12% but otherwise staying relatively the same. And the other here is increasing due to the fact that the acquired companies, being Tegema and TekPartner, have not been put into our ERP systems and, therefore, they are not in the other reports. Well, they are reported in the other segments and not reported in a similar fashion yet. And now for the key figures. So revenue was developing favorably, growth -- slight growth but still growth, 2.3%. Profitability developing very well, so 16.7% growth in EBITA and 16.6% in EBIT. Earnings per share, 23.5% development -- positive development. So good development overall. And then for the market outlook. Of course, our demand is driven by the machinery and metal industry. And right now, we see that the development for the market with our customers is favorable. And we see investment levels going up, so we now expect that the market will or has developed favorably, and we expect that it will continue favorable development throughout the year. Still right now, there are impacts from the pandemic, but what -- we think that -- currently think that from Q3, Q4, somewhere there, the situation will normalize to a what we call new normal and then we will be able to progress even further. And for the reason that we had a great start for the year and we also saw that the market was developing perhaps even better than we initially thought at the beginning of the year, so for that reason, we have updated our financial or upgraded our financial guidance. And now we expect that our revenue will be between EUR 285 million and EUR 305 million. And the operating profit EBIT will be between EUR 25 million and EUR 28 million. And if we then take a little bit more detailed look at the numbers. So on the revenue side, so growth of 2.3%. The revenue is at EUR 73 million compared to EUR 71.3 million last year. Organic growth was still negative 4%, and both these numbers slightly bigger in comparable exchange rates, in our case the biggest difference being the Swedish crown. But still, even if the organic development was negative, I would say that overall development in the company was very positive. And as the vaccinations are progressing in the different parts, we expect to be able to accelerate on our growth. We were also very pleased that we were able to call back to work our temporary laid-off employees. And at the end of the period, we only had 69 employees, and even that number has been developing positively since the quarter has ended. There was also quite good activity with our customers and especially in our solution business, the outsourcing solutions, where we were successful in these cases. And clearly, the demand for these types of services has grown as our customers are looking for more flexible and more efficient operations. So these type of models are favorable. So we have been successful in those cases, and this has contributed to our revenue growth. The revenue from key accounts decreased slightly faster than the overall organic development, so 6.8% decrease, but we also expect to improve there going forward. And as said earlier, there was 1 day less in the quarter, so that had a little bit of an impact on the growth figures as well. In the operating profit EBITA, solid development. The margin was at 10.5%, which was very good and clearly beating the comparison period. Here, of course, we are still in the remote working mode, which has a slight impact on our cost structure. So certain costs, for example traveling, et cetera, are lower than in a normal market condition, so that's supported. But overall, our operational efficiency was again very good. And for that reason, we were able to produce high results. And looking into the sort of new normal that I mentioned, so we expect that in Q3, Q4, things will normalize. What it exactly will be, we don't know exactly. We have our predictions, but it's clear that certain costs will come slightly up. But then, we expect to be able to compensate for that with the growth that we would achieve. And in the operating profit EBIT, at 9% at EUR 6.6 million. Amortizations related to acquisitions were at EUR 1 million. And also, the nonrecurring items for EBIT -- affecting EBITA and also EBIT were actually 0, so there was no nonrecurring items in this quarter. If we then look a little bit more detail on the different service areas. So in Engineering Solutions, the revenue development was flat, only slight growth, but the operating profit was solid at 10.6%, very good, healthy margin, and this was due to the success in outsourcing cases and also good operational efficiency in the operations. In Software and Embedded Solutions, we also had a good quarter, the EBITA margin at 11.1%. And here, clear growth as well with 10.9%. This was, of course, affected by the TekPartner acquisition with which we entered Denmark in the beginning of the year, and that is looking very positive for us. Denmark is an interesting market. And with TekPartner's partner-driven operating model, we see lots of possibilities for the software business but also expanding the other service areas into Denmark. So we are very much looking forward to developing that market. In the business, we had some projects starting slightly slow at the beginning of the year. But then, towards the end of the quarter, we got these projects running well and the demand for digitalization-related services is clearly high, so we hope that we are able to progress well in this service area going forward. We've also slightly increased due to the fact that here, the recruitment market is very hot and active. So we've also increased subcontracting to some extent to compensate for the personnel. And also, with TekPartner's partner-driven operating model, the number of subcontractors is increasing quite naturally in that part of the business. Again here, good operational efficiency supporting the good profitability. And in Technical Documentation, we had a strong start for the year. The revenue was dropping. We were starting from a lower number of employees for the year. But still, the operating margin was healthy at 11% -- or very good at 11%. And here, we see good demand for outsourcing solutions. We have signed several deals during Q1, and there is a good pipeline of new ones that we are talking about as well. We were also very pleased to announce the Etteplan HowTo service solution to the market, which is a sort of digital solution for creating and distributing interactive technical documentation, for example, to mobile devices or any other type of machines. And we've seen good interest for this product. We have several proof-of-concept projects already running with our customers, and there seems to be a lot of interest for this type of cloud-based digital solution for Tech Doc, where you can actually get the relevant information for the end user in a very fast mode. And we are very excited to see what this brings for us going forward. And here as well, the operating efficiency was at a high level, so the profitability was, for that reason, also very good. Earnings per share at EUR 0.21, so a clear improvement for last year. And hopefully, this year then, we will also be able to return to growing dividends, as we have had a habit of doing in the past. And cash flow, slightly worse than last year, but this was also something that we were foreseeing also last year. So last year, we were saying that when we had the temporary layoffs coming in and the business going down, so then we were able to cut the costs faster than our receivables were coming in. So then we had a really good cash flow. Now as we are growing, we are tying more capital into the business. And for that reason, we are having a slightly lower cash flow. But this is as expected and nothing special about it for the quarter. And personnel at the end of the period are lower than last year's. So last year, we had 3,402, and now 3,331 employees at the end of the period but still growing by 2% from the end of the year situation. And now, of course, with most of our temporary laid-off people back to assignments, so now we will really be able to move forward with the recruitments and other things, and we expect to grow the number of employees going forward. Now the income statement, nothing major that I have not talked about. Financial expenses at 0.4%. Interest are rather low, and tax is slightly lower than last year due to some losses carried forward in some businesses for last year but nothing major. And on the balance sheet, trade receivables coming slightly up but nothing major here either. So normal business fluctuation. And then if we look at the performance against our targets a little bit. So revenue, the rolling 12 months revenue is at EUR 261 million. But now of course, in Europe especially, we have the pandemic quarters coming up for the comparison period, and now we have a relatively good market situation. So now we expect to accelerate the growth and have a lot higher numbers going forward in the rolling figures. On the revenue outside Finland, we had 43% revenue outside of Finland and developing according to our plans towards our 50% target. And in the managed services share of revenue, the number was 64% for the quarter. So clearly, the projects and especially the outsourcing cases that we have had are improving this number from the past. And on the profit side, good profitability of 10.5% for the quarter, so exceeding the target levels. So overall, a solid start for the year and in a quite good market condition already but expecting that to improve. So we are looking forward to having a healthy growth going forward and looking forward to having a good year. So that's the end of the presentation, and now it would be time for questions.
[Operator Instructions] Our first question comes from the line of Juha Kinnunen from Inderes.
Now, gentlemen, this is Juha from Inderes. Congratulations on a solid performance once again. I guess I will start with the seasonality going into this year. I understand that the market situation is improving in the latter half. But is the seasonality going to be significantly different from the normal year?
Well, of course, the comparison period is heavily affected by the pandemic starting in Q2, having the most impact in Q2. So that's perhaps different to what it normally is. But otherwise, the seasonality should be -- if you exclude the sort of pandemic-related differences, so then the seasonality should be relatively similar, yes.
Yes. I mean kind of using the reference point as the Q1 figures but understood. About your employees. Of course, it's good that you are currently expecting a higher revenue -- significantly higher revenue compared to 2019, and you have less employees currently. But is it possible that recruitment will be kind of restricting your growth now in the latter half of the year?
That is, of course, possible as the market is improving. So then the recruitment is tougher and tighter. And we can see already now that in some areas, there are -- it's really difficult to find the right kind of employees. But I think that our position in the market has improved. We are more known as a company today than we were earlier and so on. So these are facts that are then supporting our recruitment. So it will be more difficult, but still we are doing our best to do well in this competition and therefore be able to grow.
All right. And I guess the number one question in the first quarter overall has been about cost inflation. Of course, it's -- relative to you, it's probably salaries and also the normalization of your cost structure going forward. Do you see that the first quarter profitability is sustainable, of course considering your normal seasonality when it comes to third quarter?
Well, I would say that we can maintain a high profitability. Of course, there will be some costs coming in. We've already started to invest a little bit more into our business, but there will be -- for example, travel, it is very clear that once the restrictions are over, there needs to be a little bit of traveling to visit the new companies that we have acquired, et cetera. So there will be a little bit more of these types of costs. Also, personnel expenses will need to go up, and we want them to go up in the third quarter. So there will be some more costs in the third or potentially the fourth, depending on when the situation allows that. But it's clear that then there will be some more costs, but we hope that we are able to compensate for that with then growth and improving margins through certain type -- new types of businesses and new solutions. So it will be tough to stay at these levels, but we will do our best to maintain a level which is matching our targets.
All right. Final one for me is more a larger question that I don't know if you know the answer even. But it would be like -- it would be nice to hear your thoughts about this. So we are seeing a really, really fast recovery now in the industrial sector in general. But is this a beginning of a new business cycle that will carry on for years? Or is this a recovery from pandemic and more like a temporary boost?
Well, of course, if I would know this, I wouldn't probably be standing here. But my guess is that there is a little bit of demand that has sort of gathered up during the pandemic and then there will be a little bit of boost in the beginning. It might then slightly slow down and then continue to move at a normal pace. But it's clear that certain investments have built up during the pandemic, so I wouldn't expect the same kind of growth to continue throughout the year. But there would be a sort of slight peak now and then slightly slower going forward. That is my anticipation. But still clear growth and even high growth supported by the different countries and governments giving different kind of support packages. So I think there will be healthy growth. But there might be a clear peak now that societies are opening up. That's my expectation.
Our next question comes from the line of Jerker Salokivi from Evli.
This is Jerker from Evli. I have a couple of questions. I was maybe wondering kind of in some respects when looking at net sales-to-employee ratios. I'm sorry. Can I get back to you? Got a bit of a cough.
Yes. Sure.
Yes, I'll take next question.
[Operator Instructions] We have a question from the line of Pasi Väisänen from Nordea.
Great. This is Pasi from Nordea. Well, just to confirm one issue, did you actually say that this 9% EBIT margin you actually posted from the first quarter will be hard or tough to maintain in the remaining part of the year? Because when looking at your guidance, I guess actually the guidance midpoint is the same 9%. So that actually would mean that it would be hard to actually reach the midpoint of your guidance. Or did I understood right?
I said that it will be -- I mean, there will be cost increases, and that means that we will need to work hard to maintain that. But we do expect to be able to compensate for the cost increases by moving forward with growth and by developing certain services where we have better margins. And by doing that, we will be able to reach these kind of levels. So we have the means to do it. Yes, it's going to be hard, but we still expect to be able to be there as we have given in our guidance.
Our next question comes from the line of Jerker Salokivi from Evli.
Yes. I apologize for earlier. I would like to ask about the net sales-to-employee ratio. So I guess it's hard to compare due to differences in kind of working days and such, but it would appear kind of Q4 and Q1 were quite good. And I was wondering if you could comment about utilization rates compared to, let's say, before the pandemic levels like Q1 2020.
Well, we are not actually giving out the utilization levels. But as a comment, I would say that the utilizations are currently where at the end of last year and were now quite good. They were also good, with the exception of China, in the comparison period. The comparison period first quarter of '20 was, also in Europe, very good. So I would say that we have been on sort of similar levels here in this year. But in China, clearly improving, of course, because there the pandemic had the biggest impact last year.
Okay. Could you maybe sort of comment -- I know you don't really guide on the margins for separate or business areas. But maybe now Q -- or 2020 was quite good in aspects when comparing to '19 and '18 for Technical Documentation and Software and Embedded Solutions. Could you -- can you in any way comment on maybe comparing to last year margins? What -- are the margins good? Or could they be better or worse?
Well, in some businesses, in software area, we have seen higher margins as well. And we did have some slowness in certain start-ups of projects. So there, we may have possibilities to improve. And in Tech Doc, it was a solid performance we've had. In some of the years earlier, we've had some businesses that have been performing lower than the others. And now we have been able to recover most of the nonperforming businesses, so we expect this kind of levels to continue. So this is a healthy normal level. And in this area, we also have some products with our own IPR. So if we are getting those out going very well, so we would even be able to improve on the margins in the Tech Doc area. So that's how we see it. But for us to improve there, we would need to be able to get our own service products going, for example Etteplan HowTo and the HyperSTE SaaS product, to a full flow and then there could be potentially even higher margins. But that, of course, requires a lot of work and a good success with these things.
Thank you. There are no further questions at this point, so I'll hand back to the speakers.
Okay. Thank you very much. And as a final note, we had a good start for the year, and we see that the market is developing favorably. We started with a disadvantage in the year compared to last year. But now going forward -- we, of course, last year had the pandemic, so now the comparison periods will be easier, and, therefore, our growth will accelerate significantly. And according to this picture, we are targeting to grow close to EUR 300 million or even exceed that. And we are -- certainly internally here in the company, we are targeting the revenues to start with the number 3. So we are doing our best to make that happen. And to conclude, we are, of course, happy to answer any questions that you may have at any time. And here, you have our investor contact. So our CFO, Per-Anders Gådin, our Marketing Communications Director, Outi Torniainen, and myself are available for you at any time. But thank you very much for listening in and hope you have a nice day. Thanks.