New initiatives for sustained high growth and increased profitability
BEIJER GROUP is now in the midst of an exciting and promising journey on the expansive market for digital solutions that link up different systems on wired and wireless networks, and interconnect with various IIoT applications. The Group, whose history is largely as a distributor of automation products, has repositioned as a leading-edge technology company, with a high level of expertise in software and hardware.
The strategy we staked out in 2016 is well timed and proving very viable, as evidenced when looking back at BEIJER GROUP’s overall results for 2018. Order intake and sales were up by nearly 30% and 20% respectively. Growth was exclusively organic.
I also want to emphasize that our new products have generated most of our growth. Proprietary products represented 96 percent of total sales. In absolute terms, order intake of 1.6 billion SEK was the Group’s highest to date. Sales of 1.4 billion SEK are comparable to our previous record year. We quadrupled EBIT to 74 MSEK. Our earnings performance is heading in the right direction, and we’re on target to achieve a 10% EBIT margin.
We can also assess the Group’s progress in other terms, and I’d like to highlight some of the features that distinguish BEIJER GROUP today.
Our new digital solutions facilitate communication between human and machine. Information in the form of data is captured, controlled and transported in wired and wireless networks, presented and analyzed in interactive and seamless processes. The massive volumes of information processed and transported set challenging demands on software and hardware. Our solutions help customers optimize processes at different levels of their business. They’re also mission critical, so they have to be robust and reliable.
As a high-technology Group, BEIJER GROUP currently features innovation and the development of high-end software and hardware used in harsh and exposed environments. This enables us to partner with some of the world’s most dynamic companies. Our customer base includes major global corporations with demanding standards like Alfa Laval, Bombardier, Alstom and Emerson. Their repeat orders, and the new business accounts we’ve secured, are evidence of our international competitiveness, and that we offer products and services that are in demand.
Staying at the leading edge and serving professional customers sets specific demands on an organization and its people. Our new strategy involves substantial initiatives in new solutions and adaptation of our organization. Our adaptation has involved a fairly extensive competence shift , with more focus on software and a more customer-oriented sales process. A higher share of our people now work in development and sales. Our adaptation has also meant a more dynamic corporate culture emerging–a culture featuring more belief in our future, innovativeness, initiative and active stakeholding.
Our people are central to our success
In this context, I want to emphasize the importance of our people’s efforts and competences especially. Individual professional performances, backed by mutual support and access to our corporate resources, have generated our results and laid our new platform for continued expansion. Individual freedom offers room for creativity, but this also means individual responsibility for compliance with laws, regulations and our guidelines for managing a sustainable business.
Sustainability is an important component and is integrated into BEIJER GROUP's operations. Our work on sustainability continued to evolve and intensify in the year, as reviewed in our separate Sustainability Report–there’s a summary in this Annual Report.
The Group’s three business entities are in somewhat differing phases. Beijer Electronics remains in a recovery phase, and its operations went in a clearly positive direction in the year, with high growth and progressively improving earnings. These successes are backed by new products and solutions, and a more customer-oriented sales organization.
The Westermo business entity reported its best year to date, setting order intake, sales and earnings records in 2018. It is primarily Westermo’s focus on networks for trains that underpin its successes. Westermo’s brisk growth beat our already high internal estimates, and as a result, its delivery capacity had problems satisfying demand. Westermo prioritized securing its shipments to customers ahead of efficiency, which will pay off in the longer term. These capacity problems are being continuously addressed and our actions will gradually take effect.
A stronger financial position
Last year, we took several actions designed to take our business to an even higher level. Overall, we created good organizational stability. With our previous new share issue and earnings improvements, we are now in a significantly better financial position. BEIJER GROUP also signed a new three-year financing agreement in 2018. The agreement has a total facility of 750 MSEK, bringing the Group financial flexibility and room to act for continued expansion. Going forward, we will also be focusing more on cash flow.
The Group invested over 160 MSEK in product development in 2018, which strengthens and expands our offering to the market. Westermo adopted its new expansion plan, based on its successes in the train segment and business entity’s current product range. This involves targeted initiatives on network solutions for the rail infrastructure and power distribution segments. Eventually, this initiative is expected to make a significant contribution to the Group’s, and business entity’s, growth, sales and earnings.
Beijer Electronics launched its new “Fast track to the cloud” solution with BoX2 in 2019, consisting of software and hardware, and is an IIoT application offering easy connection to existing automation equipment. BoX2 and related services will be marketed as SaaS, with hardware invoiced on delivery and software with a subscription fee.
Prospects for 2019
These new initiatives are investments to ensure sustained high and profitable growth. History is no guarantee of the future, but our investments in the X2 series within Beijer Electronics, and in networks for trains within Westermo, have been really positive, with fairly short pay-back times. Our continued, aggressive strategy also opens the possibility of upgrading the Group’s growth and EBIT margin targets.
We finished 2018 strongly, and started the new year with a well-filled orderbook. For the full year 2019, we think the Group will be able to keep increasing sales and earnings compared to the results for 2018.
President and CEO