Azkoyen Group, the Spanish multinational based in Navarre, has obtained a net profit of 3.04 million euros at the end of the first quarter in 2019, which translates into an increase in profit of 8.4% compared to the same period last year.
The Azkoyen Group’s net turnover also increased by 7.2% compared to the first quarter of the previous year (7% at a constant exchange rate) to 35.3 million euros, thereby continuing the upward trend that began in 2013. This growth is due to the good performance of the Time & Security division, which increased sales by 16.5%, as well as the Payment Technologies division, which recorded a 4.2% increase compared to the first quarter of 2018.
If we analyse the consolidated turnover by region, in the first quarter of the 2019 financial year, 17.5% of the turnover came from Spain, 79% from the rest of the European Union and the remaining 3.5% from other countries in which the Azkoyen Group operates. This geographical distribution of turnover reaffirms the international nature of the Azkoyen Group. The gross margin as a percentage also increased slightly (from 43.4% in the previous year to 43.6% this year), with a different mix of businesses and products.
Also of note is the 18,5% increase in EBITDA, which stood at 5.9 million euros at the end of the first quarter of 2019. Also, the Group’s EBITDA/sales ratio was 16.6%. For comparison purposes, before the first application of IFRS 16,[1] the EBITDA amounted to 5.2 million euros, 6.2% more than the same period in the previous year, after the growth in sales in the above-mentioned 7.2% and partially offset by certain increases in fixed costs and others, in accordance with the current organic growth plans approved on 27 February.
The EBIT increased to 4.3 million euros, 8.8% more than the 3.9 million recorded for the first quarter of the previous year.
The net effect of applying IFRS 16 on EBIT and net profit is practically nil (with a lower lease cost and, conversely, an increase in depreciation).
Net financial surplus
At the end of the first quarter of 2019, the net financial surplus amounted to 3.8 million euros. The breakdown is as follows: cash of 12.1 million euros, less debts to credit institutions of 0.3 million euros, less other long-term interest-free or reduced-interest debts of 2.1 million euros and, as from 1 January 2019, less financial lease liabilities as per IFRS 16 of 5.9 million euros.
Proposal for distribution of dividends
The proposed distribution of net profit for 2018 includes an amount earmarked for dividends equivalent to 30% of the 2018 consolidated profit, i.e. 4.7 million euros. In addition, the Board of Directors, taking into account the solid financial situation of the Azkoyen Group and the positive forecasts for earnings and cash generation in 2019, has decided to propose the distribution of an extraordinary dividend of 25 million euros, to be approved by the General Shareholders’ Meeting, with a charge to unrestricted reserves.
Overall, the total proposed aggregate dividend amounts to 29.7 million euros, around 1.21 euros per share with the right to receive a dividend (excluding the current treasury stock). In accordance with this, the ordinary dividend and the extraordinary dividend, subject to approval at the next Ordinary and Extraordinary General Meeting of Azkoyen, would be paid before 19 June 2019. Prior to this, the Parent Company will arrange, under competitive conditions, new long-term bank financing.
Also, on 26 April 2019, the Azkoyen Board of Directors agreed to submit, for approval by the Ordinary and Extraordinary General Shareholders’ Meeting, the reduction of share capital through the redemption of treasury shares. Specifically, the proposal to be made to the Ordinary General Shareholders’ Meeting will be to approve the reduction of the share capital of the Parent Company for an amount of 451,124.40 euros, through the redemption of 751,874 treasury shares (representing 2.98% of the share capital). Since the shares to be redeemed are owned by the Azkoyen Group, this capital reduction will not involve the repayment of contributions.
It should be remembered that the Azkoyen Group’s consolidated profit after tax for 2018 was the second best since 1990, only behind the profit achieved in 2001, when the company had a large one-off effect due to the massive sales of coin selectors with the introduction of the euro. After a period of adjustment and consolidation for the company, between 2002 and 2014 no profits were distributed to shareholders. Also, between 2015 and 2017, 30% of the consolidated profit was distributed in dividends to shareholders.
Sales performance by division
The Time & Security division (Technologies and security systems) recorded the strongest growth of all the Azkoyen divisions, with sales up 16.5%, to 14.5 million euros compared to €12.5 million in the first quarter of last year. It was followed by the Payment Technologies division (Electronic means of payment) which achieved 10.4 million euros and an increase of 4.2% compared to the first quarter of 2018. The Coffee & Vending Systems division recorded a fall of 1.0% compared to the first quarter of 2018 and a turnover of 10.4 million euros.
Coffee & Vending Systems
The sales revenue of the Coffee & Vending Systems division has dropped by 1% compared to the same period last year, amounting to 10.4 million euros.
The Professional Coffee & Vending business represents nearly 80% of the revenue of this Coffee & Vending Systems division. Primarily, it includes, professional automatic coffee machines for the vending industry and the Horeca sector and, to a lesser degree, cold drink, snack and other vending machines. The Azkoyen Group is concentrating a significant part of its plans around the coffee business.
In the last four financial years, the compound annual growth rate of sales was 7.3%, due, among other things, to the success of the new products introduced, as well as to the increase in the customer base in a number of geographical markets (mainly in the European Continent). The first quarter of the 2019 financial year showed a slight growth in sales compared to the same period of the last financial year (1.0%). By geographical area, the growth in the United Kingdom and the Americas has been the most noteworthy and, by contrast, there was a decline in Spain.
The Azkoyen Group continues to dedicate significant resources to innovation with the aim, first and foremost, of strengthening the distinctive features of its design, improving the user experience and applying new connectivity technologies. And, second, with the aim of achieving excellence in coffee solutions, while ensuring growth in traditional markets, generating recurrent income and developing new product niches for large accounts. And, lastly, with the aim of strengthening its expansion in the American continent.
Coffetek, Azkoyen’s subsidiary in the British market, increased its sales in sterling by 5.1%, compared to the same quarter of 2018. More than 90% of the total sales were in pounds sterling from the UK domestic market and the rest were from other markets. Following negotiations between the British Prime Minister and the European Union, the European Union has granted the United Kingdom a further extension of Brexit until 31 October.
In October 2018, the Azkoyen Group, through its Coffetek brand, was honoured at the “Vending Industry Awards”, run by the British vending industry, receiving the award for “Best Innovation in Machines” for Novara Protein, the ideal model for gyms and sports centres. This acknowledgement is added to the other two received in September, for its Vitro series, from the British vending association, AVS, as “Best manufacturer” and “Best table top vending machine”.
The Azkoyen Group recently launched the compact model, Vitro S1 Espresso, a new coffee machine, ideal for establishments where consumption requirements are less than 60 cups per day. This machine has been exhibited at Vendex Midlands, Birmingham, 9 April 2019, as well as at Vending Paris 2019, 2-4 April.
On the American continent, the Azkoyen Group attended the Cafés de Colombia Expo 2018 trade fair, held in Bogota (3 – 6 October 2018), to present several technological innovations in its coffee machines, designed to optimise their performance under high humidity conditions, as occurs in tropical regions. More recently, this same model, Vitale S, was chosen by the fast food restaurant chain, Subway, which, for the first time, will be offering coffee in its establishments in Colombia.
On another note, Azkoyen USA Inc. has now been awarded UL certification for the Vitro S5 and Vitale espresso coffee machines, which will boost the sales of these models.
With regard to the Cigarette vending machines, which account for about 20% of the revenue of the Coffee & Vending Systems division, they have suffered a drop of 7.9% compared to the same period last year.
Payment Technologies
This division has experienced a growth of 4.2% in sales compared to the first quarter of 2018, generating a turnover of 10.4 million euros. It includes Retail and industrial means of payment and means of payment for vending machines.
In Retail and industrial means of payment, sales have increased by 6.1% compared to the same period last year, with strong growth of 34.2% in the retail sector, although there was also a 16.6% fall in aggregate sales for means of payment for gaming and for service automation.
With regard to the R&D activity of Industrial means of payment, several projects are underway with a view to maintaining the current leadership in coin management, among other areas. In the retail segment, after major efforts in previous years with regards to R&D, the Group’s resources are still concentrated on its Cashlogy automatic payment system, which cuts collection time in half, strengthens transaction security by detecting fraud, and avoids cash imbalances and petty thefts.
The two cash management machines, Cashlogy POS 1500 and POS 1500X, were recently exhibited at the Alimentaria & Horexpo 2019 trade fair, Lisbon, 24-26 March. This fair is a major event for the Hotel & Catering industry in the Portuguese market. These two Cashlogy models were previously showcased, among other exhibitions, at SIRHA 2019, Lyon, 26-30 January and at IBA 2018, Germany, 15-20 September.
More than 50% of the Retail and industrial means of payment revenue is related to Cashlogy or retail means of payment. In the first quarter of 2019, sales were 34.2% higher than during the same period last year. The marketing of Cashlogy “POS1500” is being carried out intensively in Spain, Portugal and Italy, as well as, to a lesser extent, in France and other countries.
In the Means of payment for vending machines area, Coges, sales grew by 1.8% in the first quarter of 2019, compared to the same quarter in 2018. Around two thirds of the sales of products within the Payment systems for vending machines business unit, Coges, the European leader in closed environment cashless systems, are made in this Italian market.
On another note, Coges Mobile Solutions, SRL (51% owned by Coges), sells, under licence, an innovative technology that allows, among other things, vending machine payment via a smartphone application called Pay4Vend that uses the bluetooth connection to connect to the Engine and/or Unica hardware produced by Coges and installed in the vending machines.
At the Vendex Midlands exhibition in Birmingham, UK, 9 April 2019, demonstrations were given on how to operate Joyco, the new smartphone application from Coges. Joyco allows users to pay directly via their mobile phone and also allows the customising of drinks in the Azkoyen and Coffetek vending machines that have been fitted with Coges hardware. At the same time, Coges also exhibited its banknote reader for the Vending sector, Creos, which offers high standards of reliability and security.
In addition, other innovative projects continue, involving the development of “Machine to Machine” (M2M) platforms and Internet of Things (IOT) applications, which will provide added value to the Coges hardware and will also contribute to the generation of recurring income. Against this background, Coges continues presenting its main product, namely, the Nebular, this time at the Vending Paris exhibition, 2-4 April 2019. This is an innovative connectivity system that takes cashless intelligence to the cloud, allowing data to be transmitted from the Coges payment systems, which are installed in the vending machines, to certified servers, to then gain access to the machine fleet remotely.
Time & Security, primion Subgroup
The Time & Security division has successfully continued with its business strategy aimed, in recent years, at more profitable projects, geared more towards its own systems and with less integration of third-party products and subcontracts.
The primion Subgroup focuses on two markets: Access control (infrastructures and electronic systems that grant a user access to premises according to the credentials presented) and Time and attendance (software for the management and analysis of the hours worked by employees as well as other related matters).
The total turnover of the Time & Security division in the first quarter of 2019 stood at 14.5 million euros. This represents a 16.5% increase compared to the same period last year, highlighting, by geographical area, the growth in Germany, Belgium and Spain and, by contrast, the moderate decline in France. Furthermore, it should be noted that maintenance income represents around 26% of turnover. At 31 March 2019, the orderbook, including maintenance contracts and projects, stood at 35.2 million euros, with this being 3.1% higher than the same period in the previous year.
The development of products and solutions also continues in this business area. With regard to time and attendance terminals, it is worth mentioning the strategy for developing and marketing a common platform (with the new ADT11xx and 1200 ranges) and the technological upgrading of other terminals with market demand (such as the DT1000). Specifically, the ADT 1200 model includes accessibility options for visually impaired users, who can be guided through the various menus via Braille panels.
With regard to software, among other projects, considerable efforts have been devoted to the redesign of the graphical user interface, or “GUI”, to meet the needs of today’s users through an intuitive, clear and concise structure. This new graphical interface, as well as the new and interesting functions of the rest of the hardware and software of Time & Security, primion Subgroup, was exhibited at Security Essen, Essen, 25-28 September 2018, Europe’s most important event for security systems, cybersecurity and fire protection.
The defined plans for growth include major initiatives aimed at providing the organisation with the necessary resources and improving its operation.
New “2019-2021” strategic plan
The new “2019-2021” strategic plan of the Azkoyen Group has been completed with the help of a leading outside consultant. This strategic plan was approved by the Company’s Board of Directors on 27 February 2019. It establishes the goals for accelerated organic growth, along with the initiatives aimed at providing resources and supporting business development.
For 2019, the company expects an increase in income from sales in excess of the 3.2% recorded in 2018 and an EBITDA in absolute terms (“before the effects of IFRS 16” – Leases, which enters into force on 1 January 2019) that is basically similar to that of 2018, with increases in fixed costs, mainly commercial and R&D, in accordance with the approved strategic plan.
Investments by the various businesses in intangible assets (development projects in the primion Subgroup and computer applications) and materials will be boosted, with an aggregate budget for 2019 of 7.3 million euros (3.0 million euros in real numbers in 2018), 143% higher than in 2018.
The benefits of the plan will be progressive, expecting to obtain the highest increases in sales and results by 2021.