-7% organic decline, EBITA declined by 22%

Underlying margins in line with last year

Clear focus on profitability expected in 2020

Q4 results
Sales arrived at SEK 847m (-2% vs. ABGSCe 863m), down 2% y-o-y. Organic growth was -7% (ABGSCe -4%). From Q4’19 and onwards, VBG has decided to group VBG Truck Equipment and Edscha Trailer Systems into one reporting segment, called Truck & Trailer Equipment (TTE). We do note that MCC posted a 1% organic decline (ABGSCe +4%), while Ringfeder declined 4% organically (ABGSCe -9%). EBITA declined by 22% y-o-y and arrived at SEK 75m (-18% vs. ABGSCe 91m), for a margin of 8.8% (ABGSCe 10.6%), compared to 11% in Q4’18. According to VBG, the decrease in earnings was mainly related to one-time improvement costs in MCC and Ringfeder. Although the company does not quantify these numbers, we understand that the underlying margin was roughly in line with last year. VBG proposed a DPS of SEK 5.00 (ABGSCe 4.6), for a payout ratio of c. 40%.

Estimate changes
Based on the Q4 report alone, we expect preliminary EBITA estimates could come down by 3-6%. We lack insight into the extent and length of VBG’s improvement efforts within MCC and VBG, but we believe that the company will have a clear focus on improving profitability rather than growth in 2020. On our pre-Q4 estimates, we forecast a 3% EBITA CAGR for ‘19e-‘21e.

Final thoughts
VBG’s share price return over the last three months is 12%, compared to the Carnegie Smallcap index at 14%. Similar to what we are seeing within general industry and trucks, we believe VBG will have negative organic growth in 2020. However, the CEO notes that order books for trailer equipment remain strong. On our pre-Q4 estimates, the company is trading at c. 10x EV/EBITA ‘20e. The company has not made any larger acquisitions since MCC in 2016/2017, and we note that the company has a significant amount of headroom for larger M&A.

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ABG Sundal Collier - Introduce.se