Earnings Call: Q4 2020

Mar 17, 2021

Okay. Again, welcome then. My name is Janne Klimstrom, and I'm the CEO of the company. And I have been on NIMBLE since 20 10. And with me today, I have Ratan Salveen, I'm the CFO at Nynbros since 2018. So if we then can switch actually then to Page 3. Some highlights for the Q4 then 2020. We had sales that was in line with our expectations, And then roughly SEK 200,000,000, which means that we had a growth of actually then roughly 12%. The EBITDA amounted to minus 3,600,000. It's a good 1,500,000 better than last year. But then we should keep in mind that we had some one off items, as we say here, €9,200,000. Rasmus, we will discuss them a little bit more later on. But that is a good SEK 11,000,000 better than the last quarter, and I think that's important to take with you. The order book continued then to grow. It's plus 41% compared to quarter 3. And something then that we noticed then is that we have some capacity restraints in the supply chain. And we also noticed that we have a slight price increase of raw materials. And that added this is then, of course, from the fact that the supply chain is under pressure. If we then switch stage to number 4. Why invest in InBev? And this is then, of course, a reminder for you that was involved in our IPO process in the matter. But some of you is for sure new, and I think that I will then just mention that. And one Important thing is that, of course, then that we have a strong underlying market. And we also have, as we say here, several fundamental drivers. And I will, in fact, get come back to them. So I would we'll take it from there. At second then, we have our True House of Brands with this strong and distinctive brand portfolio. And this is then for the dealer, and I will get back to it also. We think that we have an attractive position in the value chain, and we have then great opportunities then to further improve the dealership offering, but also then to develop the aftermarket service. We like to have asset light and flexible production. And flexible production for us is then actually then partly that it's outsourced and The growth that we see in front of us will be a great part of this will be through this outsourced production, but also the modular boatbuilding process that we have developed during the years. We are an experienced management team. And finally, we also see that we have excellent growth opportunities from more, you can say, a geographical point of view. We have our expansion in North America. We have in there now for 4 years, and that looks great. But we also have other things, and I will come back to that. It's also Our market, our industry is very fragmented. It's a lot of small companies, family owned companies, and we see great potential then to actually then consolidate both in the distribution, but also then, of course, the brand. If we then switch Page to number 5. Nimbus was founded in 1968, And I think it's important to mention that we have a long history of international trade. We were global very early in this process. And we are our 7 brands then are well known Scandinavian brands, and we think that the combination of these 2 is interesting because a lot of our brands is well known in Nordic countries. It's good boats, good products, but they have never really tested to be present in Europe, for example, but also other places where we are present through Indus. 2012. Our new owner then R12 and the current main owner actually Did some reconstruction, I was already there at that point, and it was both interesting and developing work we did. And it's a lot of, you can say, distribution involved in that progress. I will not come back to that, but that's the fact that. And House of Brands, of course, 2018, we acquired Ollikin. And 2019. And actually, end of 2018, we bought then Bella Vennett. And Bella Vennett is finished for Bella Boats, but effective from 2019. And finally, then 2021 listed on the Nasdaq 1st North, just recently, as we know, of course. If we switch page, today a TrueHouse of Brands. And for the dealer's sake, and this is important, we want to be a big part of the dealers' business. 8. Of course, about the financial, we want the demonstration both, of course, to be from our House of Brands. But it's also For us to cover the needs for that typical boat district where the deal is present is what we want to actually then achieve. And today, we have a very strong you can see examples of it. And today, we have a strong portfolio. Of course, that could develop, But already today, it's a strong portfolio we have. Nimbus is the biggest one. We see then, of course, as I said before, we see a lot of Potentially, Accord or Flipkart to begin with. They are well known brands and we know them for sure because we have been Global for so long that these boats will work very well in Europe and also in other markets. I I was talking about the fundamental drivers in the beginning. And if I start from the bottom here, we see the overall wealth It's increasing. And in fact, from year 2000 up to nowadays, it's a multiple of 2.5. So we have 2.5 more money, so to say, to spend. And that is important for the whole recreational market, but we are a part of that market. We also see this increased popularity of staycation, and staycation is today, it's connected with the pandemic. But if we Moved the pandemic aside for a while, we can actually then say that this trend has been ongoing for quite a while now and actually year 2015, well before the pandemic, we saw that you can compare it with a little bit like a hockey stick that the trend actually then took off. And simply, we spend more money on this domestic tourism than we did 4. So a bigger part of the budget for the recreational things is spent on vacation, which then is, of course, good for us and it's good for the recreational market. If we then specifically look into the boat industry itself, It's a fact then that we have an aging boat fleet. And usually, I take the Sweden as an example. It's 45% of the Swedish fleet, is older than 20 years. And of course, a boat that is 20 years old is not that fresh. And it's from a technical point of view, then of course, way behind what we can see today. And then finally, we have the technical development. And the last 10 years, it happened a lot from that respect. And we are aiming them from the boat industry because it's the boat industry who actually is doing the technical development today. It wasn't like that before. We inherited from the car industry, for example. But today, we spend a lot of money on it, and it's a lot of the in water handling, which is so important for new boaters to actually then join us in the industry, but also for the older ones that may then be able to actually keep the boats for a longer period. The market growth from actually, it's from 2014, this figure, has an average growth, then the underlying growth is 7%. And the similar one for us here in Ingrid's group then is actually above 30%. And the biggest part of that is the organic growth plan, of course. If we switch Page to number 7, I've talked a little bit about the asset light production platform. We produce today on 7 locations, 4 by our own and 3 outsource. And actually, one of the biggest one is actually outsourced and provides us with more than 200,000 hours per year. At this point then, end of the year, we have roughly 300 employees and actually then 80 in outsourced and in Polish factory. Today, we have since we are expanding, we have more people doing overall production today. Increased variable share of cost base, and this is also then one thing. We have you can say, you can call it more or less a culture that we want to have as big part of the cost variable at possible. And we are actually then talking about the time. The timing is important. So on 6 month time, we have roughly then 90% of our cost is variable. And we think that these 6 months is a sufficient period of time to do the things you need to do, if you need to, for example, scale down. But this is about scaling up and scaling down, of course. We work a lot in the production, and actually, it must start already on the drawing boards in the production product development. And what we're working with, of course, is to not only the product, also the process we want to have this modular boatbuilding process, as we were talking about then. It's not only the progress, it's also the process, of It should not matter for the operators if they built Boat A or Boat B, so to say. If we switch to Page, dealership, as you can see, we are well covered in the Nordic countries. But It's a fact actually then that we can still densify quite a lot in the Nordic countries. This business is a very local business. As an average, when we look into it, we find the customers approximately 30 kilometers from the actual dealers. So inside that area, we find the dealers. And we are not that covered in the Nordic. But of course, if you look at the European map, you understand that we still have a lot to do with this identifying leadership. We also then see this, as we actually say here, the huge opportunity to ride the North American wave. And As I said, it's roughly 4 years since we started. And already today, if you look in the order book, North America or actually then U. S, It's our biggest market outside our the Nordic countries now. So already in 4 years, so it's a great expansion. I also mentioned the aftermarket. I didn't tell you the story behind it, and we don't have the time for that now. But In the both industry, we are not that good at taking care of our customer from the aftermarket position, as boat builders, I should as product owner. And there are other stakeholders that take care of them. And of course, we have to change that. As a product owner, we have to own our own aftermarket, and we are spending quite a lot of time and putting a lot of percent to change that picture. And that also then starts with the product development. You have to decide from the beginning what to do with this. If we click the Page 9, the order book then. The order book is strong, no doubt, if you compare them both to the quarter 3 'twenty and the similar quarter 19, it's a huge difference. And of course, I talked about the vacation, I talked about the pandemic, It all matters in some respect, of course. But we have 41% up from the 3rd quarter. What we see today is the comeback in the main markets in Europe and this is important for us. We actually sold less boats last year in Europe than we did the year before and this was related then to the pandemic. Actually, we had the shutdown in Europe. But now we can see that the orders is coming back, and we are, of course, happy with that. The U. S. Market remaining strong, no doubt. And as I say today in our report that It's our capacity that is the limit, so to say, how much we can today then grow in North America. And in general then, the order backlog continues to be strong because the Nordic countries is also continuing 2, showing great progress. Then we switch to Rasmus, and we flip the page to Page 10. Thank you, Jan Erik. The net sales increased in the 4th quarter to €199,000,000 which was an increase by 12.5% compared to last year. And we have seen a strong development in Europe. It has increased a bit about 50% compared to last year and now corresponded to 40% of the sales. For the 1st or third quarter, Europe, only corresponded to about 25% of our sales. So it's a huge improvement. We see that Sweden and Nordic countries performs well with lots of activities at the dealers And despite the season, the dark season in Nordic countries. For full year, we end up in net sales of EUR 1,029,000,000, which is an increase by 10.6% compared to last year. And our organic growth is 11 point 0%, it's a bit higher. And the difference comes from exchange effects. Mix in revenue streams Between external and internal dealers, we see that we are in a fairly stable level compared to last year, 39% for 2020 compared to 38% for last year in sales. And this is important because of the gross margin on group level, which is affected by The share of internal and external sales. If we flip to Page 11, Then we see the EBITA margin. And in the 4th quarter, it amounts to minus 3,100,000. But when excluding nonrecurring one off costs, we end up in a plus of SEK 6,100,000. And the one off costs that we have identified refers to IPO costs of 2,100,000. We have increased our reserves and commonized our Accounting principles for warranty claims, and this corresponds to SEK 3,200,000. And we have also made a write Development project from the acquisition of Bella from 2018. So that was before we owned Bella. And that amount is SEK 3,900,000. So in the 3rd Q4, we summarized the SEK 9,200,000 in one off costs. That is nonrecurring. For the full year, EBITDA amounts to €58,000,000 which is EBITDA margin of 5 point 7%. And when excluding 1, of course, for the full year, we end up in EUR 72,000,000, which gives an EBITA margin of 7.0%. And I would also like to mention that we have had negative So we have had costs from the pandemic that we have not quantified. We have estimated these to be in the area of about SEK 2,000,000 to SEK 4,000,000. But this is something that we don't really count here. If we flip to Page 12, then we see the working capital. And first, I would like to mention that we have a flat or a stable production during a 12 month period, But there is a seasonality within the industry, winter summer seasonality. And what we do is to try to deliver those to markets that are currently opened, meaning that we, during autumn, for instance, can deliver more boats to the States or to the Southern Europe or so. In the Q4, we have improved the net working capital. From the Q3, we had SEK 169,000,000 in net working capital to SEK 166,000,000 And this is a huge improvement for us. The Q4 traditionally means that we will increase working capital. This has actually been reduced then. And this has been done by working on working with prepayments. And As I mentioned before, also delivered both step to markets that are currently open. So this has reduced our stock levels compared to last year by about 25%, minus €75,000,000 When looking at net working capital in relation to last 12 months sales. We also see a significant improvement with now ending up in 16% compared to 32% last year. So let's get to Page 13. This is to remind you about our financial targets that we have communicated earlier. First, we have we say that we should have an organic growth, about 10% per year over the business cycle. And that includes acquisitions of dealers, but not brands. We should have an EBITDA margin of 10% in the medium term. We should have no senior debts, excluding real estate debts. And we have a dividend policy saying that we target to pay out 30% of net earnings. But we need to take into account, of course, financial position of the company, cash flow and growth opportunities. We have also communicated earlier that we see that for 2021, we expect to end up in a net sales between 11.50 and twelvetwenty one, which we say because of this strong order backlog that Jan described to you earlier, and also that there is a great momentum at the market. Then we flip to Page 14, and I hand over to Jan Erik again. Thank you, Rasmus. And then, what was the distant 5 pillars, you can call them, that we're now focusing on. To begin with and, of course, to develop our current offering and organization. We still have a lot of improvements. And actually, we're working with continuous improvement that is a part of our culture. Expand and densify the dealership network in Europe, also then, of course, connected with a couple of brands that we want to bring with us on this journey out to Europe to begin with. Improved aftermarket offering and also the presence then intensified part of it, so to say. Of course, we want to increase our presence in North America. And as I said, today, we are careful in that because we don't have the capacity needed. But as soon as we have ramped up, which we're working with today, we will continue that journey. And finally, as I said, it's a fragmented business, and we see a lot of then possibilities to actually then acquisition on the dealer side, but also then, of course, on the brand side. This is a long process. So this is something that we just and 2, so to say. But that is what we're working with them. If we then flip the page, you will have a summarize of the, at least, the 15 biggest shareholders. And this list is provided to us by Jurgen. And Finally, if we click the page, we'll arrive to the Q and A. Thank you. As you have mentioned, the next report then will be for Q1 will be in 11th May. Yes, so please, are there any questions? Thank you. And 2 to cancel. And so far, we've got one question in queue. That's from the line of Erik Paulson of Nordea. So I have a couple of questions here. In terms Of the Q1 coming up here for 2021 as well as the full year of 2021, What can we expect in terms of sales growth and margins from your side? As Rasmus showed that the picture then, we have Our picture is that and I think I should begin maybe from the beginning there. Our factories were more or less stopped during March due to the pandemic. We didn't see really what will this go. Finally, when we saw that, okay, we are fine and that we can continue, We then went on, but we, of course, lost quite a lot of the production there. And these boats that we lost, of course, have been sold. So that is one part of it, that we will actually then have more boats available. And we can also see that the order backlog, more or less than actually covers the same numbers in the number of boats that we actually then produced. And I would say, produced during last year. So we are quite comfortable that we will reach this level, as Rasmus indicated. And the margin, as we say, on midterm basis, we want to reach 10%, and that is, of course, a journey. But so far, we have no there is no need for us, so to say, To give a warning, we are in progress. We will continue that. We follow our plans, so to say. Okay. And on North America, your North American sales, would you say that this Is driven by the North American dealerships? Or is it coming from the actual end customers in North America? Good question, because it doesn't work exactly the same in North America as in Europe. They like to have stock in North America. We cannot provide our dealers for the moment with stock, so it's end customer we're talking about. Okay, great. And in terms of your supply shortages that you discussed here, what are the most crucial parts in this That might be delayed. And what has the actual impact been in Q4? And then a follow-up on that. What are the Expectations now going forward for Q1 as well as if you could remind us what's the most important raw material exposure that you have? For quarter 4, nothing really. So this So we can say quite new, but of course, we always keep track on changes like this. We have had delays, But so far, it hasn't affected the neither the production, neither the sales, so to say. And I think we are a big prior today, and we can gain from that. So I don't see that up until the summer, the vacations, we will most probably not see any disturbances at all really then. We can see that, For example, the polyester, which is an important part of our product, is increasing. The cost is increasing, but It's still with it at those levels. For the quarter 3 2004. It's harder to say, of course. It's a longer period from here. But We keep track on it and where we move that business. So I'm feeling confident that this should not be any big impact. But of course, we can have delays later on, but we don't see them today. Thank you. And regarding the raw material exposure there in terms of aluminum, polyester, etcetera. How large part of your raw material cost is this roughly? I'm calculating It's not a full I should actually then come back to that question because we should not speculate. But I would say roughly 20%, maybe slightly above that. In terms of polyester? Yes. We have the cost of the cost, yes. Okay. And a final one. What is included in the other external costs in the P and L or what's called in Swedish, In the quarter or full year? Actually, both since it is I'm just posing questions here. So it's regarding for the full year. Sorry? Okay. There's a mixture of rental fees. It's It covers most of the OpEx costs that is not specified. As you can see, you have personnel costs specified, but All other OpEx costs are recorded under this line. Okay. Great. Thank you very much. Thank you. Thank you. I have a Question here from Christian Krueger of LM Corp and he asked about the factory in Poland. You mentioned And in your report that the factory has been negatively affected by the COVID-nineteen among the personnel and he wonders what the status is Right now. And how fast do you think that the factor will be back in production? We have had the SICs there for roughly than 20%, which is a very high number then, of course. That is decreasing. Still, it's high. If you look at the history, then it's still high. And we're moving around 12%. This is the logic I've heard, and this is not from today. But we are decreasing, and my guess is that this will change quite quick now. So maybe in 1 month's time, we definitely have reached decent levels, maybe not at normal levels, but still decent levels. Okay. Thank you. Thank you. Currently, we have no further questions on the phones at this time. Okay. So we thank you. Then we say thank you, yes. And thank you for listening in and your time, and see you next report session then.