An extraordinary year with lessons for the future
2020 has been an extraordinary year for Gunnebo, from all angles. The pandemic has brought a new type of insecurity, which has affected the way we work and how we engage with our customers. We also had a change of ownership, and Gunnebo was consequently delisted from the Nasdaq Stockholm exchange. The year was also characterised by restructuring, while a lot of time was spent internally on a cyberattack on the company. Meanwhile we have continued our journey to becoming a more innovation-oriented company with strong offerings that create value and simplify everyday life for our customers.
A year in the shadow of Covid-19
For Gunnebo, as for everyone, 2020 was a year of thinking again, thinking innovatively and challenging ourselves. Already at the end of the first quarter we could see tendencies and clear indications of palpable economic effects, and also how day-to-day work would be changing for all our personnel.
Indeed, it is here that we find the factor that has been so crucial: our employees’ ability to adapt. We have been there for our customers and each other, sometimes under very tough circumstances. Consequently, looking back on the year, we have performed better than we originally anticipated, even though we are at far lower levels than we are used to.
Our main priority during the year has been to ensure the health of our employees and the people close to them. Our focus beyond that has been, to the greatest possible extent, to maintain deliveries through close dialogue with our suppliers and partners, so as to minimise the consequences for our customers.
Our main priority during the year has been to ensure the health of our employees and the people close to them.
Despite the circumstances, our service engineers have continued to assist customers that have key roles in society. Our production personnel have continued to deliver products despite restrictions and closures, and creative solutions have helped to ensure our customers received their deliveries on time. In addition, we have demonstrated a capacity to develop products and transition to the digital arena in our customer dealings, and also in the way we work internally.
I am proud of the way we have dealt with the effects of Covid-19. Together we have come through some very tricky times, coping with challenges we would never have thought possible a year ago. Our organisation is spread around the world and we live far apart geographically, but I have been impressed by the many examples of caring and considerate behaviour I have witnessed among employees.
Past the low point
All Business Units have been adversely affected by the pandemic since the end of the first quarter of 2020. The Group did see a gradual improvement month on month, both in terms of orders and sales, from the third quarter of the year. Provided there is no major new wave of the pandemic, the view remains that the Group has passed the lowest point. Despite the positive development trend, considerable uncertainty still remains with regard to the macroeconomic outlook, particularly because of the impact of the pandemic.
During the year, it has become clear that Gunnebo’s Business Units have been affected to different degrees by the pandemic. This is primarily because the order book, business model, offering, customer purchasing behaviour and geographical presence all differ. The Group’s order intake and net sales during 2020 fell by –17% and –19% respectively, compared to last year.
The main reasons for the decline are postponed orders, difficulties delivering existing orders, lower demand for the Group’s products and services, and limited mobility due to lockdowns on important main markets – all reasons linked to the pandemic.
The Group’s order book – orders received at the end of the year but not yet delivered – was down –4% compared to last year, which can be explained by altered purchasing behaviour among customers. We have discerned tendencies towards shorter lead times between order and delivery as a result of greater uncertainty, and customers’ willingness to invest was impacted, all of which has resulted in longer selling cycles for major projects.
We do perceive good underlying demand for the Group’s products and services when talking with customers, but unfortunately this has been hampered by the pandemic and the uncertainty it brings. Market growth for Gunnebo’s operating segments equate to between 3% and 6% in a normal economic situation. The financial effects of the pandemic were palpable during 2020, and the EBITA margin amounted to 1.5% (5.9).
Lower demand led to lower capacity utilisation in several of the Group’s manufacturing units; this has been addressed and adapted to anticipated future demand. Due to government decisions, in the first quarter Gunnebo temporarily closed manufacturing units in Kunshan (China), Halol (India) and Lavis (Italy). In addition, decisions by authorities resulted in the temporary closure of local sales and service operations in markets affected by severe mobility restrictions, from the first quarter of 2020.
During the year, Gunnebo had a clear cost focus and took powerful measures to mitigate the decrease in sales. These included reduced working hours, cost-cutting, as well as personnel-related capacity adjustments.
Harnessing our innovative power
2020 presented various decisions linked to innovation and investment, whereby we could either step back or forge ahead. In most cases, we opted for the latter. During the year, we had the courage to make decisions and take actions to future-proof our business.
We invested in our customer offering by strengthening our online presence for several of our brands and services. The pandemic has changed the way we engage with customers, and has led to the digital arena now becoming our hub – the main place where we do business.
During the year, Gunnebo had a clear cost focus and took powerful measures to mitigate the decrease in sales.
During the year, several new products and services were launched onto the market, based on the shift in market needs arising from the pandemic. H-Sense is a range of high-tech security gates with built-in body-temperature control, and OccuLinq uses an app to enable real-time digital customer flow control for the retail and office sectors, and is sold as a cloud-based service. These examples demonstrate the innovative power that Gunnebo possesses: we develop products and services based on customer needs, we are developing new business and payment models, and we are increasing our focus on launches via digital arenas. The Group also promoted existing product ranges such as contactless cash management, and launched an updated range of products that help prevent the spread of Covid-19 between customers and checkout staff.
Gunnebo also launched and marketed a range of innovative products and services in new verticals, such as the EverydaySafe™ security solution, which flexibly integrates into storage units in the home and office. With existing expertise and technology, a brand new product category was created to meet an identified customer need. This product development complements our existing offering in a new customer vertical that also includes private individuals via kitchen and furniture makers.
IT attack revealed vulnerability in our digital age
With existing expertise and technology, a brand new product category was created to meet an identified customer need.
In August, Gunnebo discovered it was the victim of an IT attack. Thanks to swift action the impact on operations was minimal, and normal business could soon be resumed. The attack on us was a very serious crime, one which unfortunately has grown to become a social problem that affects individuals, businesses and authorities almost on a daily basis. I personally think we need clearly defined joint initiatives involving experts, the police, government agencies and other stakeholders.
We opted not to communicate with the criminal elements who stole our data, and paying a ransom was never an option. The only way to curb this kind of crime is not to pay any kind of ransom. We have had to pay a high price, with far-reaching work internally as well as scrutiny of our conduct in the media. I fully understand that the IT attack caused concern among our customers. I also feel that our discussions with customers have been constructive, and that together we have been able to find flexible solutions to deal with the attack where needed.
Continued transformation focusing on core business
As part of Gunnebo’s transformation towards a more focused, profitable and innovation-oriented company, various operations in the business unit Other Business were divested in 2020. This is also in line with Gunnebo’s strategy of focusing more on its core Business Units: Entrance Control, Safe Storage and Cash Management. It was also a result of an ongoing valuation to assess the future profitability potential of operations in Other Business. In August, the Swedish operations of Gateway, which provides EAS and loss prevention systems, were divested. In November, the integrator operations for electronic security in Spain and Portugal were divested, and in December the integrator operations for electronic security in Sweden.
New owners on board
At the end of 2020, Gunnebo had a new pair of owners in Altor and Stena Adactum. I am delighted to welcome Altor to the Gunnebo world, and to continue our journey alongside Stena Adactum. In Altor and Stena Adactum we have long-term owners who will contribute resources and expertise to accelerate the implementation of our strategies.
Another result of the new ownership was that Gunnebo was delisted from the Nasdaq Stockholm exchange in December. I would like to say a big thank you to all our shareholders. Many of you stuck with us loyally over many years, and some of you were with us from the day we were first listed. I have appreciated our dialogue, your inquisitiveness and your interest in Gunnebo.
Fighting spirit, courage, and faith in the future
I have previously stated that I believe Gunnebo will emerge from the pandemic a stronger, more future-oriented company, and I still stand by that. It has been a challenging year; things have been brought to a head in all kinds of ways. Through it all we have navigated, set priorities and taken action where necessary. At the time of writing, this continues to place great demands on the organisation and the changing reality of the current business climate.
In 2020 we had the pandemic to deal with, as well as other extraordinary events such as a shareholder offer, divestments and an IT attack. The successful management of all these developments would not have been possible without my colleagues and their persistent efforts. I owe a huge debt of gratitude to you all. Thanks too to our customers and partners for our collaboration over this past year of great challenges, and for your continued faith in us as a provider of products, services and solutions that help to create a safer world.
For me, our actions can be summed up in fighting spirit, courage, and faith in the future. I take this with me into 2021 as crucial aspects of a stronger, more profitable, innovation-driven Gunnebo.
Gothenburg, March 2021
Stefan Syrén, President and CEO