Interim financial report Q1 2020: Satisfactory first quarter despite coronavirus crisis

Danish electronics giant GPV delivered satisfactory results for the first quarter despite the global coronavirus crisis. Relative to the first quarter of last year, the company saw a slight dip in its top line, but also a modest bottom-line improvement. The full-year guidance remains suspended.

GPV, Denmark’s largest electronics manufacturer, owned by Danish industrial conglomerate Schouw & Co., has so far performed well during the coronavirus crisis. The Q1 2020 revenue was DKK 679 million, down 6 per cent from DKK 718 million in Q1 2019. On the other hand, a slight improvement in EBITDA, to DKK 46 million, brought earnings to the highest Q1 mark ever.

“We knew from the beginning of the new year that 2020 would be different from the last few years. The global economy had been expanding for quite a number of years, and there were several indications that the trend was about to break. It certainly did just that, but for reasons that we didn’t realise the scope of in early January,” says GPV’s CEO Bo Lybæk, and he continues:

“After the end of the first quarter, we now know a great deal more about the extent and depth of the crisis, and so far, we’ve managed to get through the first stage of the crisis fairly well. We’ve lost a bit of revenue, but thanks to good cost management, we’ve managed to keep the bottom line stable and our cash flow high.”

The coronavirus crisis has come at a time when GPV is still reaping the synergies from the acquisition of Swiss electronics and cable-harnessing company CCS, acquired at the end of 2018. For example, GPV managed to increase its free cash flow by DKK 90 million over the first quarter of 2019, in part by reducing its working capital from DKK 856 million to DKK 720 million over the past 12 months.

It’s now green lights across the board
GPV currently operates a total of thirteen factory sites in Denmark, Switzerland, China, Thailand, Sri Lanka, Slovakia, Austria, Germany and Mexico. All sites have implemented comprehensive safeguards that meet European standards, for example enabling people to observe the two-metre social distancing rule. The factory in China was closed due to coronavirus during much of February and in early March, while the Swiss factory, which is located close to the border to Italy, was also briefly affected by the crisis. The Sri Lanka site was closed briefly during March and April, but now all thirteen sites light up green.

GPV has operated a crisis response since February 2020, monitoring the situation at all thirteen factory sites three times a week. One of the regular measuring points has been the number of employees infected by COVID-19, and that figure has been zero all through the crisis:

“We’ve monitored the situation very closely, making sure to provide detailed information both in-house and externally. We’ve provided a weekly status to our customers on all thirteen sites, and during some periods, the factories in China, Switzerland and Sri Lanka did light up either yellow or red. However, during the last couple of weeks, it’s been green lights across the board,” Lybæk continues.

Different industries affected differently
GPV is reaping the benefits of being a supplier to many different industries. Our customers in the transport segment focusing particularly on construction equipment have been hard hit by the coronavirus crisis, whereas GPV’s customers in the MedTech industry have enjoyed very strong growth. In industry, the biggest segment for GPV’s products, the situation is quite mixed, as some industrial groups are doing quite well, while others are hard hit:

“During a crisis, our customers are like a bag of liquorice allsorts. Some enjoy high growth rates and are buying more from us, while others buy hardly anything at all. This is where we benefit from not having tailored our production to accommodate a few large groups of products or customers. Instead, we are agile and can quickly adapt to serve customers experiencing growth because of the crisis,” Lybæk continues.

He adds that GPV has good visibility for the second and third quarters, but that the situation could easily change. It is still too early to say anything specific about the fourth quarter or provide full-year guidance for 2020. Instead, the previous guidance, which was for revenue of DKK 2.8 billion and EBITDA in the DKK 210–240 million range, has been suspended for the time being:

“We believe we have a reasonable understanding of how our company will be affected by the coronavirus crisis, but it’s still too early to quantify the demand crisis that will follow at some point. It goes without saying that we will monitor the situation closely, and we’re ready to respond promptly and effectively,” he continues.

In a position to take a long-term view
For GPV and the company’s owners, Schouw & Co. (which incidentally also owns five other international businesses), the corona crisis is a bump in the road that will not prevent GPV from retaining its ambitious growth targets for the longer term. The company continues investing steadily to be able to deliver better products and provide better service in the future. Currently, GPV is working on implementing a new manufacturing execution system (MES) across all factory sites. The MES will involve further process digitalisation and resource management, and GPV aims to reap huge benefits from having uniform procedures across all production sites:

“As an EMS partner to a number of major global OEMs, we see our main role as helping our customers generate growth. We do that best by digitising more and more of our operations. Incidentally, we are already first movers in terms of digitisation within a wide range of markets. We’re in a position to continue along that path, and this is precisely what we expect will help us win market share and attract new customers in growing markets in the long term,” Lybæk points out.

GPV has trialled a number of online meeting solutions that make it easier to interact with customers during the corona crisis. The initial experience is so promising that Lybæk expects some of the trials will become permanent solutions at GPV:

“There is no doubt that the corona pandemic has been an eye opener as to the possibilities of implementing digital collaboration. It’s yielded positive results and clearly we will take the learnings with us when we come out the other side of this crisis,” he concludes.

For further information please contact
Bo Lybæk, Chief Executive Officer, GPV, tel. +45 2128 8797 (direct)