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The Azkoyen Group’s net profit totalled €2.8m at the end of the first quarter of 2018, 15.8% higher than last year

Grupo Azkoyen | The Azkoyen Group’s net profit totalled €2.8m at the end of the first quarter of 2018, 15.8% higher than last year
artículo Azkoyen
3 May 2018

– EBITDA rose by 0.6% to €4.9m and the high EBITDA cash conversion continues

– Profit before tax is up by 9.6%, standing at €3.9m

– Financial debt has fallen by €2.3m with a positive net cash balance of €7.1m

– The Vending Systems division leads the growth, with a 3.8% increase in sales

The Navarrabased Spanish multinational Azkoyen Group has earned a net profit of €2.8m at the end of the first quarter of 2018, a 15.8% increase on the same period last year.

The Azkoyen Group’s net turnover has fallen slightly (0.7%) in comparison with the same period in 2017, with a figure of €32.9m. This net decrease is due to a progressive reduction of 2.7% for the Payment Technologies division and 2.5% for the Time & Security division, together with 3.8% growth for the Vending Systems division.

Analysing the turnover by location, 17.3% of the figure for the first quarter of the year comes from Spain, 78.3% from the rest of the EU and 4.4% from other countries in which the Azkoyen Group operates. This geographical distribution of turnover is another indicator of the Azkoyen Group’s marked international character.

Its EBITDA grew by 0.6% during the quarter, totalling €4.9m at the end of March 2018, and its EBIT has increased by 4.4% in comparison to the same period last year, standing at €3.9m.

The EBITDA to sales ratio has continued its gradual upward trend and is now 15%, 0.2% higher than last year, when it stood at 14.8%.

Debt converted to positive net cash flow

The Group’s high EBITDA cash conversion rate has continued, generating a net financial surplus of €9.4m over the last twelve months, €5.7m in the last nine months of 2017 (after having earmarked €3.3m to dividend payments and €2.6m to acquisition of retail shareholders of the primion sub-group) and €3.8m in the first quarter of 2018, going from (i) €2.3m of net financial debt at the end of the first quarter of 2017 to (ii) €7.1m of net financial surplus at 31 March 2018, and it is now able to embark on inorganic growth plans.

Its net financial expenses were 88.7% lower than in the same period last year.

Evolution of sales by divisions in the first quarter of the year

The Vending Systems division (cigarette machines and vending machines) has seen a 3.8% increase in sales, achieving €10.5m as compared to €10.1m in the previous period. Secondly, the Time & Security division, despite being the highest selling business unit with sales of €12.5m, has undergone a slight decrease (2.5%) compared to the first quarter of 2017. Lastly, the Payment Technologies division saw a drop of 2.7% in comparison to 2017, although this unit’s turnover was close to €10m.

Vending Systems

This cigarette machine and vending machine division has increased its sales by 3.8% in the first quarter of the year as compared to the same period of 2017.

As to sales of Cigarette vending machines, after heavy shrinkage of this segment in 2017 there has been a significant 24.2% increase as compared to the same period last year, with growth of the volume of orders on the various geographical markets. The Azkoyen Group thus continues to be a reference point for the large tobacco companies on the European market, with different projects currently underway.

The Vending machine segment basically comprises professional automatic coffee vending machines for the Vending industry and HORECA sector and, to a lesser extent, vending machines for cold drinks, snacks and other items. In this area, the Azkoyen Group is focusing its plans on the coffee business, currently a growing sector. At the end of the first quarter of 2018 it recorded a slight drop in sales, 0.9% less than in the previous quarter.

This decrease is partly due to less automated home packaging terminals being supplied in Spain (-4.7%) and, to a lesser degree, the effect of the average quarterly exchange rate between the euro and the pound sterling (-1.3%). On the other hand, this business unit’s main activity has grown by 5.1%, having performed particularly well in the UK and to a lesser extent in Spain and France.

Coffetek, Ltd., Azkoyen’s subsidiary in the UK, has succeeded in increasing its sales in pounds sterling by 9%.

With regard to the Vitro range of OCS/dispensing machines, which has enjoyed great success in Europe, particularly in the UK, the Azkoyen Group attended the AVEX trade fair held in September in Birmingham (UK). It showcased several different models at this exhibition, including the Vitro S5, a machine providing a high supply of whole bean coffee and designed for the HORECA sector. This launch coincides with the market introduction of the second generation of the Vitro range, with a more attractive design and other innovative technological features.

The Azkoyen Group has also presented two new free-standing machine models: (i) the Novara Double Cup, whose improvements include two whole bean coffee hoppers and two grinders (dispensing one type of coffee for the more expensive choices and another for the cheaper selections), also dispensing drinks in two different types of cups, and (ii) the Zensia Double Espresso, which includes a double grinder and provides an excellent chance to improve coffee serving profit margins and user satisfaction. This machine was a runner-up in the Best Industrial Design category for last year’s “Dobry Wzor” Awards, held each year by the Polish Institute of Industrial Design.

In December 2017 the Azkoyen Group installed the first vending machines in the new Westbahn trains in Austria, specifically the Mistral+ H85 model, which is fully adaptable to different product types and locations. The refurbishment plan for these trains is set to continue in 2018 and 2019.

In Vietnam, the installation of Palma Xtra Drinks model machines has also begun at the Vinpearl theme parks and other strategic locations such as the RMIT and BUV private universities in Hanoi, the French Embassy, the offices of the national television channel VTV and a major chain of Saigon supermarkets, among others. These contracts have enabled the Azkoyen Group to strengthen its presence on the Asian market.

In America, the company Azkoyen USA INC., based in Charlotte, North Carolina, was created in 2017 with a view to developing the professional automatic coffee machine and vending machine business in the U.S. In March 2018, the Azkoyen Group attended the NAMA Show for the third time. With regard to the U.S. market it has recently obtained UL certification for the Vitro S5 and Vitale espresso coffee machines, which will help boost sales of these models.

The Azkoyen Group continues to invest major resources in innovation for its range of vending products, with a view to achieving a better, more attractive design and improving user experience, machine connectivity and excellence of coffee solutions.

Time & Security

2017 marked a major milestone for the Azkoyen Group: it became the sole shareholder of primion Technology AG, which gave it greater control of this company, increasing synergy generation.

The primion sub-group continues its successful marketing strategy and in the last few years it has focused on more profitable projects, geared to its own solutions and with less integration of third-party products and outsourcing, together with more efficient management. Development of its products and solutions thus continues.

In the first quarter of 2018, sales have dropped by 2.5% as compared to the same period last year. However, this is partly due to an earlier Easter this year, which fell in March. There was also a 4.7% increase in customer orders to €13.4m. At the end of the first quarter of 2018 the order portfolio, including projects and maintenance contracts, amounted to €34.1m, 16.9% higher than in the same quarter of 2017. With regard to other business, sales have grown in France (6.9%) and Benelux (1.8%) and have fallen in Germany (-3.3%) and Spain (-22.7%).

The primion sub-group has launched a new application for time management and workplace assistance, “prime Mobile”, making it easy for employees to consult their working hours, notify absences, clock in or check their balances for hours, holidays, etc., from any location. At the same time, their team leaders can access a clear overview of their work and quickly approve any requests received. This web application is available in several different languages and adapted for use on mobile phones.

Payment Technologies

This division includes industrial payment systems and payment systems for vending. Its sales have fallen by 2.7% as compared to the same period last year.

In the Industrial payment systems division (which includes gaming, service automation and retail), sales are up by 9.6%, with excellent growth of 78.9% in the retail area, which now represents 44.7% of the income for the segment. However, aggregate sales of payment systems for gaming and service automation have fallen by 16.6%. In the retail segment, after a major R&D effort made in previous years the Group continues to focus its resources on its automatic payment system, Cashlogy, which cuts payment times by half, reinforces the security of the transactions by detecting fraud and prevents petty theft and cash register shortages.

After intensive testing was successfully carried out, the new improved range of the Cashlogy product – the POS1500 version, replacing its predecessor POS1000 – was launched to an enthusiastic reception at the international Dusseldorf Euroshop Retail Trade Fair in 2017. Among other new features, its accessibility is improved with inclusion of the new flip-up banknote module and connectivity to all the most common operating systems at shops worldwide – not only Windows but also Android, iOS and Linux, the latter catered to by the POS1500x model. Like its forerunner, this model incorporates state-of-the-art technology and has become one of the most reliable devices on the market, with better features and performance and an affordable price. These advantages mean it will continue to be progressively acquired for use in retail establishments such as bakeries, fish shops, chemists, bars and restaurants.

This model is being intensely marketed in Spain and Portugal and – although to a lesser extent – in Italy and France, among other countries. Testing is also being conducted and new distribution contracts negotiated in other countries within and outside the EU.

The Cashlogy POS1500x has recently been showcased at Europain 2018, the international trade fair for bakery and confectionery sector professionals held in Paris from 3 – 6 February. Cashlogy is also progressively being developed to work with non-euro currencies. In this latter regard, in February 2018 the Cashlogy POS1500 banknote module was certified by the Bank of England, after proving its effectiveness in detecting and rejecting the known counterfeit English, Scottish and Northern Irish notes.

Finally, in the Payment systems for vending machines segment (Coges), sales were 14.4% lower than in the same period of 2017, although there has been a 30.8% increase as compared to the same period of 2016 (partly due to the positive effects of the enforcement of new tax legislation in Italy). This year, approximately 69% of the sales of payment systems products by the vending machine business unit (Coges, Europe’s leading company for closed environment cashless systems) have been made on the Italian market.

Information from independent external sources reveals that vending machine operating companies will need to invest heavily in the gradual conversion of payment procedures to cashless systems, with new technological solutions complementing the functions offered to vending machine users and operators.

Coges Mobile Solutions, SRL (51% owned by Coges) is licenced to market an innovative technology enabling vending machine payment to be made via a smartphone app called Pay4Vend, together with other aspects. This app allows the user account to be recharged with notes and coins at the vending machine itself, using a credit card or PayPal, virtually and with no need for the machine to be equipped with banking hardware. Among other advantages, it also offers operators an online management and marketing tool and a communication channel with customers. The app is available for Android and iOS operating systems. There has been an increase in its implementation on this market in 2017, along with those of the UK, France and Spain, with the respective involvement of other major accounts in these countries.

Lastly, other innovative projects are currently under development to create machine-to-machine (M2M) platforms and Internet of Things (IOT) applications, which will provide Coges’ hardware with added value and also contribute to generating recurring income. These new solutions will shortly be presented at the vending sector’s benchmark European trade show, Venditalia 2018, to be held in Milan from 6 – 9 June.

Key prospects

The Azkoyen Group continues its commitment to boosting growth of sales and innovation while maintaining operating efficiency and cost control. With regard to innovation, in the first quarter of 2018 R&D overheads accounted for 7.7% of net consolidated turnover, this percentage being similar to that of the same period last year.

Taking into account the economic forecasts recently published by the European Commission, predicting that GDP growth in the eurozone as a whole will be 2.3% in 2018 and 2% in 2019, for 2018 overall the Azkoyen Group expects (i) a moderate increase in income from sales and (ii) an EBITDA slightly higher than for 2017 in absolute terms, with some increases in overheads, mainly business and R&D costs.

The different business units’ investment in intangible assets (development projects for the primion sub-group and computer applications) and materials will also be boosted, with an aggregate budget of €5.5m for 2018 (as compared to an actual figure of €3.6m in 2017).