Doro - The spin-off we have been waiting for
5% sales miss, but adj. EBIT was 30% above ABGSCe We make relatively small estimate changes We view its proposal to spin off Care as positive Solid ending to a challenging year Doro delivered good Q4 results, with 13% adj. EBIT growth y-o-y. Sales were SEK 490m, a -5% miss vs.
our forecast of SEK 515m. This corresponded to a drop of 20% y-o-y, of which Products declined by 29% y-o-y (ABGSCe -22%) and Care grew +11% y-o-y (ABGSCe +5%). Adj.
EBIT was SEK 47m for a margin of 9. 6% (vs. 6.
7% in Q4’19). Our forecast was SEK 36m. The EBIT beat stemmed from lower opex than expected, which declined 14% y-o-y amid Doro’s restructuring programme.
As expected, we saw sequentially improved gross margins for Phones, driven by beneficial FX movements (EUR/USD). We see room for margin improvements in 2021e Although adj. EBIT was better than expected, we leave our EBIT forecasts for 2021-2022 relatively intact after the Q4 report.
We continue to see good prospects for improved margins in 2021e, driven by 1) a slowdown in the sales decline for Phones (due to easy comps); 2) further cost-savings (in Q4, Doro had reduced opex by SEK 82m of the intended SEK 130m); and 3) improved organic growth rates for Care. Although we pencil in a small recovery for Phones in ‘21e, we still expect the business unit to report a 7% drop in growth due to ongoing COVID-19 impact in H1’20 and because Doro has decided to exit some of its non-core markets (e. g.
North America and parts of southern Europe). 9. 2x 2021e EV/EBIT and 13.
1x P/E While the report was solid, even more interesting was Doro’s news announcement of its intention to spin off its Care business. Given the large discrepancies between the two units, we have been waiting for this to happen. The reason is that we believe each unit will perform better on its own, with improved efficiency and innovation.
In rough terms, Phones could, if the proposal is approved by the AGM, become a “cash cow” with some double-digit EBIT margins albei.
