Azkoyen Group, the Spanish multinational based in Navarre, has obtained a net profit of 6.5 million euros at the end of the first half-year in 2019, which translates into an increase in profit of 4.1% compared to the same period last year.
The net turnover of the Azkoyen Group also increased by 5.3% (5.2% at constant exchange rates) compared to the first half of last year, reaching 72.1 million euros. This growth is due to the good performance of the Time & Security division, which increased sales by 13.4%, as well as the Payment Technologies division, which recorded a 4.6% increase compared to the first half of 2018.
If we analyse the consolidated turnover by region, in the first half of the 2019 financial year, 19.5% of the turnover came from Spain, 76.2% from the rest of the European Union and the remaining 4.3% 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 (from 42.9% in the previous year to 43.7% this year), with a different mix of businesses and products.
It is also worth mentioning that EBITDA increased by 14.3%in the first half of 2019, reaching 12.0 million euros. Also, the Group’s EBITDA/sales ratio was 16.6%.
The EBIT also increased to 8.9 million euros, 6.1% more than the 8.4 million recorded in the first six months of the previous year.
The Group retroactively adopted IFRS 16, recognising the cumulative effect of the initial application of the standard on 1 January 2019 (in the consolidated balance sheet, lease liabilities of approximately 6.1 million euros and right-of-use assets for the same amount), without restructuring the comparative information.
For comparison purposes, as at 30 June 2019, before the first application of IFRS 16, EBITDA amounted to 10.8 million euros, 3.0% more than the same period in the previous year, after an increase in the gross margin of 7.2% and partially offset by certain increases in fixed and other costs.
As a result of the new regulation, in the first half of 2019, EBITDA increased by 1.2 thousand euros (operating lease payments were previously included in EBITDA, but depreciation of assets for right of use and the financial cost for lease liabilities were excluded). As at 30 June 2019, the consolidated balance sheet includes assets for right of use and lease liabilities, both amounting to approximately 6.7 thousand euros.
The net effect of applying IFRS 16 on EBIT and consolidated net profit is practically nil (with a lower lease cost and, in contrast, an increase in depreciation).
Payment of dividends and others
The Ordinary and Extraordinary General Shareholders’ Meeting held on 4 June approved the distribution of an ordinary dividend of 4.7 million euros and an extraordinary dividend of 25 million euros charged to unrestricted reserves. The total approved dividend amounted to 29.7 million euros, more than 1.21 euros for each of the existing and outstanding shares with the right to receive a dividend. This dividend was paid on 19 June 2019. Prior to this, on 10 June 2019, the Parent Company arranged long-term bilateral bank loans totalling 20,000 thousand euros with two Spanish financial institutions. With quarterly repayments, they have a final maturity in four years.
After the above-mentioned distribution of dividends and the accounting for lease liabilities under IFRS 16, the net financial debt at the close of the first half of the 2019 financial year amounted to 25.1 million euros.
Also, at the same Ordinary and Extraordinary General Shareholders’ Meeting, a reduction of share capital for an amount of 451,124.40 euros was approved through the redemption of 751,874 treasury shares. Since the shares to be redeemed were owned by the parent company, this capital reduction did not involve any repayment of contributions. The capital reduction was formalised in writing in front of a notary public on 12 June 2019 and was registered in the Companies Register of Navarre on 12 July 2019.
Sales performance by division
The Time & Security division (Technology and ecurity systems) recorded the strongest growth of all the Azkoyen divisions, with sales up 13.4%, reaching 28.7 million euros, compared to 25.3 million euros in the first half of last year. It was followed by the Payment Technologies division (Electronic means of payment) which achieved 22.3 million euros and an increase of 4.6% compared to the first half of 2018. The Coffee & Vending Systems division recorded a fall of 3.5% compared to the first half of 2018, with a turnover of 21.2 million euros.
Coffee & Vending Systems
The sales revenue of the Coffee & Vending Systems division dropped by 3.5% compared to the same period last year, amounting to 21.2 million euros.
The Coffee & Vending business represents nearly 80% of the revenue of this division. Primarily, it includes Automatic coffee machines for the Vending industry and the Hotel & Catering 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 and the increase in the customer base. The first half of the 2019 financial year showed a downturn in sales compared to the same period last year (-8,3%), with a significant reduction in the volume of orders in the second quarter of 2019. By geographical area, we would highlight a half-yearly decline in sales in Spain and France.
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. The company will seek to accelerate growth through specific measures including, but not limited to, increasing the sales force, reinforcing marketing and strengthening the H & C channel.
Coffetek, Azkoyen’s subsidiary in the British market, recorded a 2.1% decline in sales in pounds sterling in the first half of 2019 compared to the same six-month period in 2018. Around 90% of its total sales were generated in pounds sterling for its domestic market in the United Kingdom and the remainder went to other markets.
The Azkoyen Group has launched the Vitro X3 Duo model, an innovative machine capable of producing espresso coffee and leaf tea, as well as the compact Vitro S1 Espresso model, a new coffee machine ideal for centres with a required consumption of less than 60 cups per day. Both models have been exhibited this half-year at a number of events including the European Coffee Fair, the Tea & Soft Drinks Expo 2019, London, 21-22 May, the Vendex Midlands Fair, Birmingham, 9 April 2019, as well as at the Vending Paris 2019 event, 2-4 April. We also sponsored the AVA Live 2019 event in London on 13-14 June, organised to celebrate the 90th anniversary of the Automatic Vending Association (AVA), the largest trade association for the vending industry in the UK.
On the American continent, it is worth mentioning that UL certification has been obtained through Azkoyen USA, Inc. for the Vitro S5 and Vitale espresso coffee machines, which will boost sales of these models in the US market.
Also, the volume of sales revenue from Cigarette vending machines, which represents a percentage close to 20% of the Coffee & Vending System has seen an increase of 14.1% over the same period last year.
Payment Technologies
This division has experienced a 4.6% growth in sales compared to the first half of 2018, generating a turnover of 22.3 million euros. It includes Retail and industrial means of payment and means of payment for vending machines.
In Retail and Industrial payment technologies, sales have increased by 3.7% compared to the same period last year, with strong growth of 33.3% in the retail sector, although there was also a 22.5% fall in aggregate sales for means of payment for gaming and for service automation.
With regard to the R&D activity of Industrial payment technologies, 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 cash drawer, which cuts collection time in half, strengthens transaction security by detecting fraud, and avoids cash imbalances and petty thefts.
The two cash drawers, 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 series 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 half of 2019, sales were 33.3% 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 Payment technologies for vending machines area, Coges, in the first half of 2019, sales grew by 5.8% compared to the same six-month period in 2018. Around two thirds of the sales of products within the Payment technologies 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 through a web portal or via an App, or through its integration into third party managed software.
Time & Security, Primion Subgroup
The Time & Security division successfully continues the 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 defined plans in progress include important initiatives aimed at providing resources and improving their performance.
The total turnover of the Time & Security division in the first half of 2019 stood at 28.7 million euros. This represents a 13.4% increase compared to the same period last year, highlighting, by geographical area, the growth in Germany, Spain and, to a lesser extent, Belgium and, by contrast, a moderate downturn in France. It should also be noted that maintenance revenues represent around 27% of turnover. At 30 June 2019, the order book, including maintenance contracts and projects, stood at 36,4 million euros, this being 3.0% 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).
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.
Key prospects
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 as a whole, the growth in sales revenue is expected to be higher than the 3.2% recorded in 2018 with EBITDA in absolute terms (“before IFRS 16” – Leases, which came into effect on 1 January 2019) basically similar to that of 2018, with increases in fixed costs, mainly for sales 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.