Delignit’s annual results were in line with the preliminary numbers and the company had already warned of the significant impact of COVID-19. Delignit has a large exposure to the automotive segment and OEMs’ factories have been shut for six to seven weeks. Delignit therefore withdrew its guidance for 2020. The company is well positioned to return to growth in the longer term driven by improving market conditions for commercial vehicles, further expansion in the US, the addition of new customers and potential M&A.
Delignit reported 7% revenue growth in 2019, in line with its revised guidance in August 2019. Automotive reported strong revenue growth of 18%, but Technological Applications faced a decline in revenues of 31%. Growth in Automotive was muted due to delays in projects and lower than anticipated call-offs in the LCV segment. As a result of additional costs related to several projects, EBITDA declined 15% to €4.8m. This reflects a margin reduction of 220bps, of which 200bps was related to the slower than anticipated ramp up of the new motor caravan order.
At the beginning of 2020, management was very positive about the company’s growth prospects on the back of favourable market conditions for commercial vehicles, new serial supply contracts, the contribution of the motor caravan order and the Technological Applications segment returning to growth. However, in light of the COVID-19 outbreak, Delignit’s short-term outlook is now uncertain. The company has a high exposure to the automotive sector (85% of total revenues) and many automotive manufacturers (partially) closed their factories for six to seven weeks. While activity has been gradually building up again since the beginning of May, it still remains far from normal. As a result, Delignit withdrew its guidance for 2020 and also decided not to pay any dividend for fiscal year 2019.
Delignit trades at a large premium to its peer group based on EV/EBITDA: 67% for 2019 increasing to 236% in 2020. Although we acknowledge that the uncertainty associated with the impact of COVID-19 is high, this premium might suggest that investors remain confident in management’s ability to maintain strong growth on the back of the post COVID-19 economic recovery.