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Kitron today reported improved revenue, order backlog and profitability for the fourth quarter and full year 2017. The Board of Directors proposes increasing the ordinary dividend and paying an extraordinary dividend and has also updated the dividend policy.
Peter Nilsson, Kitron's CEO, comments:
"We ended 2017 on a positive note in the fourth quarter. Strong growth, improved profitability and improved capital efficiency indicate that we are on track towards our strategic targets. It is especially gratifying that the improvements continue despite component availability being a challenge for the industry in 2017. This demonstrates the importance of Kitron's strong supply chain."
High order intake and order backlog
Kitron's revenue in the fourth quarter amounted to NOK 668 million, compared to 570 million in the same quarter last year, an increase of 17%. Adjusted for foreign exchange effects, the increase was 12.5%. Growth compared to the same quarter last year was particularly strong in the Industry market sector. Defence/Aerospace also recorded solid growth. The order backlog ended at NOK 1,306 million, an increase of 28% compared to last year. Orders received in the quarter were NOK 941 million.
Operating profit (EBIT) was NOK 43.1 million, compared to 34.1 million last year, an increase of 26%. Profitability expressed as EBIT margin was 6.5%, compared to 6.0% in the fourth quarter of 2016. EBITDA was NOK 56.9 million, an increase of 24% compared to last year. Net profit amounted to NOK 29.6 million, an increase from 25.4 million. This corresponds to earnings per share of NOK 0.17, compared to NOK 0.14 last year.
Profitability improvement and increased dividend
Full year revenue of NOK 2,437 million gave an overall revenue growth of 16% for the year. Growth adjusted for foreign exchange effects was 17%. Operating profit for the year ended at NOK 148.7 million, compared to 117.8 million in 2016, resulting in an EBIT margin of 6.1%, up from 5.6% in 2016. Profit after tax was NOK 99.0 million, up from 74.6 million, corresponding to NOK 0.57 earnings per share, compared to 0.43 in 2016.
The Board of Directors proposes an ordinary dividend of NOK 0.35 per share and an extraordinary dividend of NOK 0.20 per share for 2017. Last year the dividend was NOK 0.25. The reason to propose the extraordinary dividend is the clearly improved free cash flow in 2017.
The board has also decided to update Kitron's dividend policy. The new policy is as follows: "Kitron's dividend policy is to pay out an annual dividend of at least 50% of the company's consolidated net profit before non-recurring items. When deciding on the annual dividend the company will take into account company's financial position, investment plans as well as the needed financial flexibility to provide for sustainable growth."
The previous policy was to pay a dividend of 30%-60% of net profit.
Improved capital efficiency and cash flow
Net working capital decreased by 5% from NOK 512 million to NOK 486 million compared to the same quarter last year, continuing the trend of decreasing net working capital compared to revenue. Operating cash flow was NOK 90.8 million, compared to 36.4 million in the fourth quarter 2016.
Active management of component availability
A shortage of electronic components has made 2017 a challenging year for many companies in the electronics manufacturing services industry. So far, Kitron's swift and systematic approach combined with the company's preferred partner program has prevented it from any serious supply disruptions. Kitron has also been able to pick up business where it was second source and its competitors were not able to secure supply. Shortages and allocations are expected to continue in 2018 and the first half of 2019. Nevertheless, Kitron plans to reduce material cost in the same manner as it has done over the past three years.
For 2018, Kitron expects revenue to grow to between NOK 2,500 and 2,700 million. The EBIT margin is expected to be between 6.1% and 6.5%. The growth is primarily driven by customers in the industry and energy sectors. The profitability is driven by cost reduction activities and improved efficiency.
Kitron will publish a capital markets presentation today, in which the company will provide a status update on its progress towards the targets given at previous capital markets days. See separate stock exchange notice for highlights.
Kitron is one of Scandinavia's leading electronics manufacturing services companies for the defence/aerospace, energy/telecoms, industry, medical devices and offshore/marine sectors. The company is located in Norway, Sweden, Lithuania, Germany, China and the United States. Kitron had revenues of about NOK 2.4 billion in 2017 and has about 1 450 employees. For more information, click here.