Year-end report 2020
October - December
· Net sales increased by 60% to SEK 140m (87).
Organic growth amounted to 77% during the quarter
· Operating profit amounted to SEK 76m (39).
Adjusted operating profit* amounted to SEK 76m (40)
· Operating margin was 54.4% (44.6).
Adjusted operating margin* was 54.4% (45.4)
· Cash flow from operating activities amounted to SEK 49m (20)
· Earnings per share, diluted, amounted to SEK 2.23 (1.16)
January - December
· Net sales increased by 36% to SEK 365m (268).
Organic growth amounted to 43% during the year
· Operating profit amounted to SEK 167m (108).
Adjusted operating profit* amounted to SEK 168m (110)
· Operating margin was 45.8% (40.3).
Adjusted operating margin* was 46.2% (41.2)
· Cash flow from operating activities amounted to SEK 116m (63)
· Earnings per share, diluted, amounted to SEK 4.93 (3.28)
· The Board of Directors proposes a dividend of SEK 3.50 (3.00) per share,
corresponding to 71% of the net earnings during the year
Organic growth of 77% in the fourth quarter, concludes up a strong but strange year
Good growth in the fourth quarter, which historically has been our strongest quarter sales wise, resulted in a strong end to 2020. The growth was primarily driven by the Sport helmet category, with continued good demand for our MIPS solutions, particularly in bicycle helmets. We experienced positive trends for motorcycle helmets. Our expansion continues to be driven by implementation of MIPS solutions with our existing customers, but also from high consumer demand for both bicycle and motorcycle helmets with MIPS solutions. After a challenging spring with large shut down of retail outlets during the first six months of the year, we managed to reverse the trend and deliver 73% growth during the last six months of the year. As a result, we achieved 36% growth for the full year and, adjusting for currency effects, our organic growth was 43%.
I am pleased with how quickly we have been able to respond to the increased demand during the last six months and that we managed to deliver all orders we received during the year. Although it has been a challenging year in many ways, we have continued to implement MIPS systems in more helmets than ever before. We have continued to invest in research and development and in 2020 we launched several new products that have been well received by our customers.
Operating profit increased by 96% during the quarter and amounted to SEK 76m (39). The operating margin increased to 54.4% (44.6). We achieved strong growth in operating cash flow, which amounted to SEK 49m (20). For the full year, adjusted operating profit increased by 53% to SEK 167m (108). The adjusted operating margin was 46.2% (41.2%). Operating cash flow increased during the year by SEK 53m to 116m (63).
Efforts to increase the awareness of helmet safety and MIPS solutions
Raising awareness of helmet safety, MIPS and our products around the world is one of our most important initiatives which continued to be our priority during the quarter. We announced another member in our Team MIPS, Brandon Semenuk. Brandon is one of the leading athletes in mountain biking and with his dedication to safety awareness, we have another ambassador for the MIPS brand. As Team MIPS is one of our major initiatives, we will continue to add athletes in 2021.
The corona pandemic has limited physical meetings and forced us to increase our digital presence in many ways. We have had virtual tours with journalists in our office and in our test laboratory, which have been successful, and given MIPS large visibility in leading industry magazines. Our adaption has worked well and I am pleased with how we have increased our interaction with media despite the restrictions.
MIPS systems are now available in 729 helmet models offered by 121 customers
We delivered solutions to 7.2 million helmets during the year and we continue to see great interest from, and good growth with, our largest customers. We continued to grow in all geographic markets in which we are present and at the end of 2020, MIPS solutions were implemented in 729 helmet models, compared to 583 helmet models the year before. Further, we continued to increase the number of customers, at the end of the year we had 121 customers, an increase of 18 customers during the year.
Effects from COVID-19
It is difficult to grasp all the effects of the corona pandemic, especially in terms of future effects on our business. Our current view of the situation can be summarized as follows.
Helmet category Sport – continued high demand in bicycle helmets
Normally our sales in the fourth quarter are mainly solutions for bicycle helmets. This was even more apparent this year, as the strong development in the Sport category was driven by high demand for bicycle helmets. As mentioned earlier, the inventory levels in retail are low. This means that the current production is aimed at restoring stock levels and building up the stock for the coming season. As demand has exceeded our customers' manufacturing capacity for helmets, we expect to see continued high manufacturing volume coming quarters. Despite a challenging environment, we have continued to broaden our customer base with 11% during the year and have now 107 customers in the Sport category in total.
We have previously communicated that we see a weak season ahead of us in sales of snow helmets. The reason is not that the underlying demand for winter sports has decreased, but that winter tourism has been limited by restrictions in the wake of the corona pandemic. It is impossible to predict what the future holds, but we have chosen to look with some caution at the future development in snow helmets. On a positive note, despite weak sales, we continue to advance our positions and gain market share through higher share of MIPS solutions in our existing customers' range of products compared to previous years.
Helmet category Motorcycle – continued high demand
In the category Motorcycle, we have continued to see a favorable development. The volume in the quarter grew by 79% and even though it is still from relatively small numbers, it is inspiring to see that the customers who have launched MIPS solutions in their helmets continue to show encouraging trends. We have been helped by the introduction of the new helmet standard ECE 22.06, but we also see great interest from our existing customers who are increasing the proportion of MIPS solutions in their range of products offered. At the end of 2020, there were MIPS solutions in 26 helmet brands, which is an increase of 37% compared with the previous year.
Helmet category Safety – positive interest for MIPS in the construction industry
Although we are still at an early stage in the Safety category, we see great interest in safety helmets and an increased understanding of the impact of MIPS systems on various injury criteria. Our initial marketing and sales activities have mainly been concentrated on the Nordic market, but during the second half of 2020 we expanded our activities to the broader international market with a focus primarily on the UK, Germany and the US. The work has paid off and at the end of January, we announced a collaboration with a leading helmet manufacturer in the UK. Centurion is the first customer to use our newly developed solution for construction helmets with harness suspension, another technology that we have developed and launched in 2020.
Strong end to a strange year. Our financial goals remain unchanged
2020 has been a challenging year in many ways. I am proud of how our organization has handled the major fluctuations and at the same time launched new solutions for future growth. Everyone at MIPS has, despite changing conditions, taken on a lot of responsibility, and helped to advance our positions in a very satisfactory way. We have continued to invest in our strategic initiatives during the year at an unchanged pace. With continued good demand for our products, I look forward to the journey towards achieving our long-term goals.
President and CEO