Hello and welcome to the Alfen 2020 Q1 trading Update. My name is Val and I will be your coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero and you will be connected to an operator. I will now hand you over to your host, Marco Roeleveld, CEO of Alfen, to begin today's conference. Thank you.
Thank you for this introduction. Good morning, welcome to this webcast about the results of Alfen in the first quarter of 2020. We appreciate the fact that you have taken the effort to participate. This webcast and the questions that may come after the webcast are handled by the management board of Alfen, Jeroen Rossen, CFO, Richard Jongsma, CCO, and myself, Marco Roeleveld, CEO. Business-wise, the first quarter was and is a very good start of 2020. However, the impact of COVID-19 makes the near future increasingly unpredictable. In this webcast, we will start with an update of the COVID-19 situation in relation to Alfen. Then we will continue with the highlights of the first quarter of 2020, followed by a short review per business line of the most important topics in the first quarter of this year.
Next, we will go in more detail on the financials and outlook. Assuming you have noted the usual disclaimer, we can now go to sheet three with an update of the COVID-19 situation in relation to Alfen. Our number one priority is to keep our employees, our suppliers, and our customers safe. As such, we've put measures in place to optimally safeguard the health and safety of us all. This is key to ensure we continue to operate and serve our customers. We are following guidelines and requirements of national and local health authorities closely, and we have put in place contingency plans to minimize potential impact on our supply chain and delivery to customers. At the moment, the direct impact of the global COVID-19 crisis on our business and markets cannot be quantified. Many businesses and sectors in various countries are affected, and potential further impact is unclear.
Until now, our order intake is reasonably strong, and we do not yet encounter canceled orders, and our supply chain is still functioning, and our production is up and running. We cannot give any further guidance at the moment due to the early stage of the COVID-19 crisis, and these are uncertain times, and the personnel and the economical impact on society is enormous. It makes the near future increasingly unpredictable. A key consideration for Alfen is that the long-term market drivers remain unchanged and strong. We continue to monitor the situation closely, and we stay in close contact with our customers, suppliers, logistics providers, and are taking proactive steps when needed to address the situation as best as we can. We continue with slide five with the highlights of the first quarter of 2020.
We realized in the first quarter EUR 44 million in revenue compared to EUR 28 million in the first quarter of 2019. This presents a growth of 58%. This growth was driven by a 25% growth in smart grid solutions, a 194% growth in EV charging equipment, and a 144% growth in energy storage. The gross margin was this quarter a little lower than the exceptionally good gross margin of the same period last year, but 1 percentage point better than the fourth quarter of last year. As a percentage of revenue, the adjusted EBITDA improved from 6.1% last year to 10.4% this year. Jeroen will go in more detail on the financials later on in this presentation. In the coming three sheets, we will go in a little more detail on each of our business lines.
We start on sheet six with smart grid solutions, where we have realized a revenue growth of 25%. Alfen continues to benefit from grid investments, projects in the solar PV sector, and revenues from service. In addition, the ability of Alfen to integrate products from all its business lines in the grid is increasingly becoming a differentiator. COVID-19 might affect the microgrid projects, primarily the greenhouse and solar PV sector, whereas we experience a continued focus on grid upgrades by the grid operators. Commercial successes in this first quarter include a new source contract for IONITY, a two-year framework agreement in Finland to supply 350 substations to the Finnish grid operator, Caruna, and a contract to supply about 25 high-end substations for Infrabel, the operator of the Belgian rail infrastructure. We now continue on sheet seven regarding EV charging equipment, where we have realized a revenue growth of 194%.
This increase is driven by a growing market for electrical vehicles, an increasing volume on the framework agreements that have been set up over the past years, and new client wins and further internationalization. Especially our businesses in Germany, the Netherlands, and the U.K. have experienced strong growth in the first quarter of this year. Additionally, we have celebrated the milestones of having produced more than 100,000 charge points since the start of the EV charging business in 2008. Although COVID-19 might have an impact on the delivery of EVs, Alfen continues to believe in the long-term trend towards e-mobility. Therefore, Alfen expanded its sales team in Spain and further strengthened its sales team in Belgium, Germany, France, and Sweden.
To be prepared for the continuous strong growth, we are moving our charging operation to a new and larger facility and significantly expanding its production capacity with ample room to further expand over time while driving further efficiencies. Commercial successes in this business line include supplying UMiCo with EV charging equipment for its new e-mobility program, a contract to supply 900 public chargers to Vattenfall for the city of Amsterdam, and providing Deutsche Bahn with EV charge points for their offices. We now continue on sheet eight regarding energy storage systems, where we have realized a revenue growth of 144%. The first half of 2019 was characterized by challenging market circumstances for energy storage. However, the last month of 2019 and the first quarter of 2020 have shown a significant pickup in the demand for energy storage projects.
Alfen is now benefiting from the early investments in the latest technologies, for example, our mobile storage systems and high-density, large-scale stationary concept. The COVID-19 impacts to the deployment of mobile energy storage systems are festival, which will delay investments in this specific market segment. Commercial successes for energy storage include a contract for a 20 MW energy storage system for Vattenfall in Sweden, three storage systems to provide frequency stability services for Numa, and four energy storage systems for a Belgian energy aggregator, VirtuaPower. Now, Jeroen, our CFO will continue on sheet nine with a more in-depth explanation of the group financials, and later on, he will continue with our comments on the outlook.
Thank you, Marco. Let's start with our revenues. The revenues in the first quarter of 2020 were EUR 44.1 million, which is a growth of 58% compared to the first quarter of 2019 with EUR 28 million on revenues. Our gross margin was 34.8%, which is lower than the 36.2% in the same quarter of the previous year, but it's 1 percentage point higher than the 33.8% of the fourth quarter of 2019. We continued to benefit from our strong market position, from our leverage from increased scale, and from a shift towards increasingly complex solutions. If we look at our adjusted EBITDA, that was EUR 4.6 million, which is 10.4% of our revenues, compared with EUR 1.7 million in the first quarter of 2019 being 6.1% of revenues. Finally, our net debt adjusted EBITDA ratio is 1.4, compared with 1.3 at year-end 2019, which is a result of some working capital movements.
From the financials, we now go to the outlook on slide 10. With respect to the outlook, we cannot give any further guidance at the moment due to the current stage of the COVID-19 crisis. These are uncertain times, and the personal and economic impact on society is enormous and makes the near future increasingly unpredictable. We do, however, continue to monitor the situation closely, and we are taking proactive steps where needed to address the situation as best as possible. Furthermore, we continue to anticipate long-term positive market developments in all of our business lines, and we are well positioned for further growth based on our leading market position. As the long-term growth drivers remain unchanged and strong, we continue to invest in our organization, in innovation, and in production facilities.
Finally, although the impact of COVID-19 remains uncertain, we continue to focus on growing our market share, on reaping the benefits of our internationalization strategy, on the increasing cross-selling opportunities between our business lines, and on the further expansion of our service offering. We are now at the end of the presentation, where I will hand over to the moderator for any questions. Moderator, could you please take over?
Thank you. As a reminder, if you'd like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. Please ensure your line remains unmuted locally. You will be advised when to ask your question. Again, that's star one on your keypad. We do have a question in the queue. The first one comes from the line of Lotte Timmermans from ABN AMRO. Please go ahead.
Good morning, gentlemen. First, on the increased leverage, you said this was due to working capital investments. Can I assume these are due to increased inventories because you had to store some materials due to the availability due to COVID-19? Is this structural?
I think if you look at our working capital, you always see that the working capital at the end of the year is relatively low due to the fact that inventory levels and work in progress is low at the end of the year. Building up the business again in the first quarter and second quarter always gives some rise to working capital. It is a rather normal movement that we see here.
Okay, thanks. On the gross margin, it was relatively stable compared to full year. What can we expect for the remainder of the year compared to year 2019, by the way?
Of course, what we said last year is that especially in the first half of 2019, the gross margin was also supported by a very favorable product mix. We explained that in our capital markets day in 2019, as well as with the presentation on the financial year results of 2019. We also emphasized at that time that there are a couple of elements also contributing to our gross margin, which would be of a more continuous basis, like the strong market position, the leverage from the increased scale, and the shift towards increasingly complex solutions. That is what we see continuing also today.
Okay. Do you have any additional COVID-19-related questions? Do you expect this to have for the remainder of the year?
At the moment, as we say, the order intake is reasonably strong. The supply chain is functioning. The production is up and running. That is what the situation is at the moment. That is what it is for now.
Okay. The mobile storage systems you deliver to Greener, are these already paid? What do you mean with the decreased investments? Did you mean that you anticipated some more orders or in energy storage, I mean?
What we say in energy storage is we announced these projects in 2019. From an accounting perspective, we do a percentage of completion if you look at revenue recognition. That is what you see there. Already part of those revenues were taken into account in 2019, also part in the first quarter, and there will also be revenue in the months after this. I think we explained with the energy storage in the webcast that if you look, for example, at the festival market, which is one of the markets for our mobile energy storage solution, there you see that, of course, there are no festivals at the moment due to the COVID-19 crisis. It remains a bit uncertain how the investments, especially in that market segment, will be going forward.
Greener mainly delivers to festivals, right? Or what kind of other applications do their systems have?
Yeah, good. I'm not Richard here. Greener indeed has a focus on festivals, but they also have alternative business propositions for different market segments. Look at temporary construction sites, temporary places like hospitals and emergency situations where they have temporarily an urgent energy need. They have alternative markets available.
Okay. On the charging business, I know you normally do not give a split on private versus public, but I can imagine that, is it a correct statement that I can assume that private chargers are more impacted than the public chargers due to government plans and not being entirely directly linked to EV registrations and EV sales? What do you see and what do you expect from that?
What we see is that until today, what we say is that the order intake is as expected. The production is continuing, and the supply chain is also still intact. We have a very good first quarter. What we can say is that we are not certain about the future, but until today, it is as expected.
Okay, thanks. Those were my questions. Thanks.
Thank you. We currently have no further questions in the queue, but just as another reminder for everyone, please press star one if you'd like to ask a question. We do have another question that is registered, it comes from the line of Jan Richard from Berenberg. Please go ahead.
Yes. Good morning, everyone, and thanks for taking my questions. I have a couple of high-level questions, I would say. The first one is on EV charging. I do appreciate that visibility is still limited, but what are your views on the growth you could expect in this segment for the rest of the year? Do you see any—are there any discussions ongoing in the markets where you operate to extend maybe support packages and subsidies for electric vehicles? That would be my first question, please.
Yeah. Jan, good morning. What we see is that the long-term fundamental drivers for the energy transition and therefore for the stimulation of EV driving is still intact. Even though we see, of course, the current situation with some hampering situations in market development and where car manufacturers temporarily closed their factories and they are now starting up again, we see until now, we do not see any signs of delay. We had a very good first quarter, very good order intake. We are able to produce the products that we need. Supply chain and production is intact. What we read is that there is no sign whatsoever that stimulation and the development and the growth of the energy transition is being delayed.
Okay. Would you be able to give us any comments on the overall order intake at the group level at the end of March versus a year ago?
We do not give that numbers, Jan. The only thing what we can say is that up until now, up until today, the order intake is reasonably strong. As Richard also said, production is up and running, supply chain is functioning. That is what we can comment on at the moment.
Okay. A quick one on the smart grid segment. How have your discussions with your clients in this segment evolved since the outbreak started? It would be good to have to separate between grid operators and the project side of the business. You do give some indications in the press release, but it would be good to have any more color on, yeah, on the discussions you have and how those have evolved.
Yeah, yeah. Good question. If you separate them for the smart grids, the grid companies, they are not affected on this at all. They continue to invest in the grid. These are organizations and companies that have a long-term view, and they are hardly impacted on the investments in the distribution system. If you look at the private networks, of course, there you can expect some delays, if you would say. For instance, for the PV parks and their investments by foreign companies, they tend to send their teams, for instance, from Eastern Europe into the Netherlands. Of course, that might be impacted because they have ample access to get out of the country or to get into the Netherlands. You might see some delays there. Further, we see with the SDE subsidy being expanded for another year, we do not see any long-term disturbances there.
Okay. Just two more questions on my side. One is on, yeah, the first one is on, do you foresee or expect any structural changes in your cost base in a post-COVID-19 world or not? If you do have some extra costs today, are those really one-offs or you see them continuing, and would that impact your profitability going forward?
I think if you look at our first quarter, we show operational leverage, we show growth. That's, of course, what we always say. We strive for profitable growth. That's also what we are looking at going forward. As we are up and running and it's functioning, we don't encounter one-offs or COVID-19-related one-offs. Going forward, as the long-term growth drivers remain intact and we are fully convinced that the energy transition will continue, we also continue to invest in our organization.
Okay. Very clear. Very last one on my side on M&A. I mean, you have a pretty strong balance sheet at the end of March. Are there any changes to your M&A policy here? Are you maybe looking a bit more at some opportunities in some countries, some competitors which could be a bit weaker, or any extension into a new business line? Any update on this, please?
Hey, Marco. We have always stated our strategy is based on autonomous growth. If there are opportunities, we might consider them, but our strategy is more or less intact or is intact. I think the thing we could say is we know the market drivers. We know that the strategy we have taken forward to give market shares in all the different countries is proven a success. We continue with this strategy.
Okay. Very clear. Many thanks.
Thank you. The next question comes from the line of Tanuj Agrawal from Barclays. Please go ahead.
Hi, morning, all. A couple of questions for me. Looking at the investments in the grid, I mean, they continue, and that's very well fathomable, I would say, I mean, well understood. Just trying to understand and respond with on the DSO side, they have increased their CapEx plans going ahead 2020 as well. Since we see installation of smart meters would not be at the pace they would have expected given the social distancing, do you see some diversion of the capital which has been budgeted for their CapEx to get into grid investment rather, which is really imminent, actually, the investment in grid is imminent? Do you see, are you already seeing that DSOs getting more positive around grid, diverting their funds from smart meters to the grid investment?
Hi, Tanuj. It's Richard here. I think that is a good observation. We see, of course, a delay of installing smart meters because of the COVID situation. We are not sure if this will accelerate the investments in the infrastructure for distribution sites. What we see is we see an as-expected intake from the grid companies. For us, that would be speculating, and we don't do that.
Thanks for that. Just to follow up on that further, as in from your release and presentation as well, it sounds as if the DSO part's strong, but the industrial seems to be kind of the one which is impacted with the COVID, which is quite reasonable. Now, within that, there are secular demands as well. I would say when you talk of microgrid, you talk of companies investing in data centers. Are you seeing some support from that part of the business excluding house and solar?
What we see is that, and what I said before, we see some investment decisions might be delayed due to the COVID-19. We also see that there is a lot of activity with SDE subsidies being expanded or extended and still being fully filled. We see that the long-term business potential and the underlying drivers remain the same. Temporarily, we can expect some delays in investment because of the COVID-19, also because what I said earlier, a lot of these foreign companies bring their own installation teams from abroad, and they might have some problems with bringing these teams due to the travel restrictions.
Understood. I think that's all from me. Thank you for taking my question.
Thank you. The next question comes from the line of Patric Lindqvist from Handelsbanken. Please go ahead.
Good morning, guys. Thanks for a good quarter and keeping your staff safe. I just had one question on we discussed this on the gross margin and increasing complexity, which normally in most businesses leads to better gross margins. If we look on the page nine, slant of the gross margin trajectory, it's not really showing that apart from the first quarter. I just wanted to understand, are you seeing some kind of inflection point here? Because gross margins are bottoming out in the fourth quarter and coming back a bit in the first in terms of the complexity of the product. Is that how I should read it?
I think if you look at the gross margin, you see that there was a decline in the second half of 2019. We explained at that time that there are a couple of elements going forward which will support the growth in our gross margin. Because if you look in the year before that, the growth was very steep. That is what we said. It was also supported by a very favorable product mix. That is something going forward, that product mix that changes. That is what you see now. What we said at that time is that we said, "Okay, there are a couple of positive elements which are there to stay and which give rise to a higher gross margin." Compared especially to the first half of 2019, the product mix at that time was very, very favorable.
It does not mean that it is not favorable at the moment, but it is less favorable than it was in the first half of 2019.
Okay. Great. Thanks.
Thank you. There are no further questions in the queue, so I'll hand the call back to our speakers to conclude today's conference.
Hey, I would like to thank everybody for joining in this webcast and asking also relevant questions so that we could elaborate a little bit on the situation where we're in and speak to you next time. Thank you all.
Thank you for joining today's call. You may now disconnect. Hoss, please stay on the line and await further instructions.