InvestorsMessage from CEO
CEO Q4 2020
Polygiene ends the year with a new sales record and the acquisition of Addmaster Ltd
Net sales for the quarter amounted to MSEK 26.6 (19.0), an increase of 40% (currency-adjusted growth 55%) compared to the previous year. The total net effect of currency differences amounted to MSEK -1.4 during the quarter. Operating profit before tax was MSEK -2.4 (-2.2), due to the costs of MSEK 2.6 incurred with the acquisition of Addmaster Ltd. EBIT after adjustments for acquisition-related costs showed an improvement of MSEK 2.0 compared to 2019. Cash flow during the fourth quarter also improved although it remained negative, MSEK -3.1 (-4.9).
Polygiene broke yet another sales record this quarter, reporting a 40% growth (currency-adjusted growth 55%). The gross margin was slightly lower than in previous periods, amounting to 64.9% (68.7%), mainly due to lower royalty income and increased shipping costs. In combination with a currency impact of MSEK -1.4, the result was MSEK 0.2 (MSEK -2.2), excluding the acquisition costs of MSEK 2.6. It is gratifying after five years to report that the company is in the black figures for the fourth quarter as well as for the full financial year of MSEK 1.5 (MSEK -6.6). The quarter was also affected by the start-up of several new and exciting partnership agreements announced during the year, many of which will prove profitable in 2021.
What lies ahead may be characterized by what the quarter’s results may have been with Addmaster as part of the Group. In the proforma table including Addmaster, the Group shows an operating profit of MSEK 9.4 (excluding acquisition costs), which corresponds to an EBIT margin of 15 %. Both companies are in very strong growth phases; in January 2021 alone, growth jumped by as much as 72% compared to the same period last year. This percentage reflects the removal of internal sales between the companies.
The transaction, announced in December and unanimously approved at the Extraordinary General Meeting, is a milestone in Polygiene history. From a strategic perspective, the acquisition is logical, given the great synergies that exist between the companies. For more than a decade, Polygiene and Addmaster have fostered a strong partnership; together, we can strengthen our position in the market with a broader offering. The companies complement each other very well and, like Polygiene, Addmaster has completed a year of strong growth with fantastic results.
The deal was closed on January 8, 2021, and intensive work to integrate the two companies has begun to take advantage of the synergies resulting from the transaction process. This primarily means broadening the Polygiene range to cover materials other than textiles as well as leveraging the global sales network, one of Polygiene’s strengths. At the same time, under its existing brand, Addmaster will also be able to offer and meet the increasing demand for antimicrobial textile treatments. Resource reallocation within the Group also presents huge opportunities to streamline functions, thereby enabling more support to sales and marketing in a growing market. The collaboration has worked well thus far; both organizations are positive about the merger and clearly understand the underlying logic behind the deal. To ensure stable growth over the coming year, we will develop a long-term strategy with a clear brand platform and a sustainable company structure.
The future of antimicrobial technologies
Despite the vaccine news and high hopes that the pandemic will soon be over, Polygiene does not expect interest in antimicrobial treatments to diminish. Awareness of the risks associated with bacteria and viruses has increased significantly among the general population and, even in a post-coronavirus world, greater demands will be placed on hygiene and cleanliness. As society reopens and we begin to travel, socialize and return to the workplace, textiles and surfaces with antimicrobial treatment will provide added value for people who move about and interact with others. Polygiene, together with leading industry experts, therefore, believe that demand for antimicrobial treatment will continue for preventive purposes.
Stays Fresh, our antibacterial technology experienced some challenges in the first half of the year due to all the lockdowns but has recovered during the fourth quarter. During 2020, sales experienced a net loss of about 20%. However, we started the year full of optimism believing that the worst is behind us. Demand is clearly stronger in 2021 compared to the same period last year. Sales growth is up 3% in the last quarter, signaling the potential end to the downward trend and a return of higher volumes in 2021. ViralOff® accounted for approximately 23% of the sales in the last quarter, compared with 35% in the previous quarter. Also gaining momentum is Odor Crunch, which, over the year, has expanded its customer base from just a few to 23.
Polygiene continues to sign new agreements at a similar rate; during the quarter 29 new partnership agreements were signed. In total, approximately 100 new partners were signed in 2020, of which about half have begun placing orders. Together with Addmaster, which also added hundreds of new customers during the year, I feel confident that we will continue to deliver profitable growth at the pace we have seen in recent months for many years to come.
2020 has been an unprecedented year for everyone. For Polygiene, it has been a very special year where we have created a unique position with ViralOff® as a driving force. Moreover, we do not expect the momentum created in 2020 to come to an end. On the contrary, we see continued, strong demand for antimicrobial treatments – from a sustainability perspective both to meet the challenges of the textile industry and to protect surfaces from bacteria and viruses in the post-coronavirus world. Polygiene can help make a difference and encourages everyone to contribute to a more sustainable world. Our upcoming quarterly reports will show what we are going to create, a company with strong growth and high profitability.
Following the new share issue at yearend, Polygiene acquired several new shareholders, of which a large proportion consists of institutional investors, a sign of strength that creates both stability and long-term sustainability. A new chapter has been written in our company history, and I firmly believe that exciting developments lie ahead of us. The team and I will do everything in our power to meet or exceed expectations and prove that the new constellation of Polygiene is a force to be reckoned with.