iLOQ is a Finnish, rapidly expanding and internationalizing technology company that transforms mechanical locking into digital access management.
iLOQ’s technological solutions enable electronic locking without batteries or cables. The Company’s products are sold through iLOQ’s distribution channel providing professional installation and maintenance services. The Company has nearly 900 resellers globally. Revenue increased steadily during the financial period 2019 in both the oval and DIN lock cylinder markets. The manufacturing of the products is based on outsourced, flexibly scalable production, distributed by the iLOQ-managed distribution center. In addition, the company has a small-scale production unit to support product development needs.
In accordance with its growth strategy, iLOQ continued in 2019 to strengthen its organization to support the Company’s long-term internationalization and growth targets. The most significant investments were focused particularly on strengthening the Company’s international sales and marketing as well as product development. In accordance with its growth strategy, iLOQ continued in 2019 to strengthen its organization to support the Company’s long-term internationalization and growth targets. The most significant investments were focused particularly on strengthening the Company’s international sales and marketing as well as product development. The Company has subsidiaries in Sweden, Norway, Denmark, Germany, the Netherlands, France, Spain and UK.
iLOQ launched iLOQ S5 in the Nordic countries in fall 2019. With the publication of iLOQ S5, the Company utilizes even further the opportunities offered by digitalization and the Internet of Things in improving safety, decreasing administration and reducing lifecycle costs.
In May 2018, iLOQ released the world’s first mobile access management solution utilizing NFC technology, iLOQ S50, which is aimed at electricity production and distribution companies, telephone network services, server centers, water treatment plants, property maintenance services and transport services. The successful launch of the iLOQ S50 access system showed that we do not only rely on one product and technology. And when Apple finally opened its NFC (near field communications) function to third party manufacturers in its new iOS 13 operating system, the opportunities for further development in user access management that is not dependent on hardware is now in practice limitless.
iLOQ also made strong investments in improving the transaction experience of its reseller network and end customers by introducing the iLOQ partner portal and by enhancing the effectiveness of expert support processes and tools.
In addition to expanding its reseller network, the company concluded a Frame Agreement with the Domus Arctica foundation (DAS). The Company was selected to become a member of KONE’s partner network and the interaction between the companies’ technologies and application interfaces brings additional value in access control by using KONE’s digital platform. Nokian Tyres selected iLOQ’s locking system for its future testing center in Spain. In addition, several measures have been implemented and initiated to enhance the iLOQ brand and awareness of it. The objective is to achieve good visibility among the main target groups in the market areas important for the Company in Central and Northern Europe.
The long-term Chairman of the Board of Directors with eight years’ service, Veijo Karppinen, passed away in fall 2019, and Harri Takanen, member of the Board of Directors, was elected new Chairman of the Board of Directors.
In May 2018, the Company announced that it is assessing the possibility of listing the company’s shares on the Nasdaq Helsinki Ltd stock exchange as well as other possible alternatives for ensuring the Company’s fast growth and internationalization. In December 2019, iLOQ’s majority shareholders closed a Transfer Agreement concerning the sale of iLOQ to a company whose majority shareholding is in Nordic Capital Fund IX. The purchase price of the acquisition executed as a share transfer was EUR 190 million.
BUSINESS ACTIVITIES DURING THE FINANCIAL PERIOD
iLOQ turned a strong profit for the seventh consecutive year, despite strong growth and significant investments in internationalization. iLOQ Group’s net sales in 2019 came to EUR 61.1 million (2018: EUR 50.2 million), an increase of 21.5% in comparison to the same period in the previous year. The revenue from Central European operations increased by 19.2% compared to the previous year and came to EUR 10.5 (8.8) million. The revenue from operations in Northern Europe came to EUR 50.6, a growth of 22.0% to the same period in the previous year. In Northern Europe, growth in euro terms was strongest in Sweden.
The Company’s profitability, measured in all key indicators, developed in a positive way in the financial period 2019. The strong growth strengthened the sales margin, which increased by 23.3% from the previous year to 55.8% of revenue (55.0%). The operating profit (EBITDA) for 2019 was EUR 10.4 million (2018: EUR 9.5 million). The expenses for 2019 include one-off expenses relating to work in charting the company’s strategic alternatives in the amount of approximately EUR 0.1 million. The number of the Company’s personnel at the end of the year was 152 (129), a growth of 18% to the end of the previous year. Net operating profit (EBIT) was EUR 7.4 (8.3) million, or 12.1% (16.5%) of revenue. The Company’s profit for the reporting period 2019 was EUR 5.5 (6.5) million.
|Revenue growth (%)||21.5 %||24.5 %||19.6 %|
|Gross margin (%)||55.8 %||55.0 %||55.7 %|
|EBITDA (%)||17.0 %||18.8 %||25.0 %|
|EBIT (%)||12.1 %||16.5 %||22.7 %|
|Investments, tangible and intangible assets||4,720||3,301||1,726|
|Investments (% of revenue)||7.7 %||6.5 %||4.3 %|
|Solvency ratio (%)||60.6 %||68.6 %||70.4 %|
|Return on equity (%)||28.4 %||33.4%||43.1 %|
|Average number of employees||147||109||78|
|Number of employees at the end of period||152||129||86|
REPORT ON THE SCOPE OF RESEARCH AND DEVELOPMENT ACTIVITIES
The Company has invested in the development of new products and the further development of the features and manufacturing processes of existing products. The most important development projects were the development of the mechanics, electronics and software for the iLOQ S50 locking system, which was introduced to the market in the last financial period, as well as the iLOQ S5 access control system launched in the Nordic countries in the fall.
Investments in tangible and intangible assets capitalized in 2019 totaled EUR 4.7 (3.3) million.
FINANCIAL POSITION OF THE COMPANY
The Company’s liquidity and financial position were at a good level at the end of the financial period 2019. Cash flow from operating activities in 2019 was EUR 8.7 (3.8) million. The Group’s balance sheet total at the end of the financial period was EUR 34.7 (26.4) million and equity ratio 60.6% (68.6%).
FINANCIAL ARRANGEMENTS AND SPECIAL RIGHTS
The Annual General Meeting held on 21 March 2019 authorized the Board of Directors to decide on a share issue as well as to grant option rights and other special rights entitling to shares in accordance with Section 10 paragraph 1 of the Companies Act in one or more batches in such a way that a maximum of 150,000 new or treasury series K shares can be granted either against compensation or without compensation.
On the basis of the authorization, shares or special rights entitling to shares could also be offered as a directed share issue in deviation of the shareholders’ subscription right. The Board of Directors is also free to decide about the terms and conditions of the share issue or special rights.
The authorization is valid until the start of the next Annual General Meeting, however at the latest until 30 June 2020, and the authorization cancelled the previous authorizations granted by the Annual General Meeting held on 23 March 2018. No options have been issued on the basis of the open authorization.
In addition, the Annual General Meeting decided to direct a total of 2,600 options to the members of the Board of Directors in such a way that an individual member can receive a maximum of 650 options, each of which entitles to subscribing for one new series K share in accordance with the share’s option terms. The subscription period for the options is 1 January 2020 – 31 December 2021.
The Annual General Meeting held on 23 March 2018 decided to authorize the Board of Directors to decide on a directed share issue of a maximum of 60,000 series K shares. The Board of Directors is free to decide about all the terms and conditions of the directed share issue. The authorization is valid until further notice and on the basis of it, the Board of Directors has decided on 31 December 2018 about a directed share issue of 1,500 shares. In addition, in the financial period 2018, the Board of Directors decided about a directed share issue of a total of 5,300 new series K shares on the basis of the share issue authorization granted by the Annual General Meeting on 22 March 2017. The Company had a weighty financial reason in accordance with Section 9, paragraph 4, subparagraph 1 of the Companies Act to issue directed share issues, because they were connected with the incentive and engagement program of key personnel.
The subscription price received for the share issues has been recognized in the invested unrestricted equity fund of the company.
The Annual General Meeting of 2018 authorized the Board of Directors to decide about an option program under which a maximum of 60,000 new series K shares can be subscribed. The Board of Directors is free to decide about the terms and conditions of the share program.
There is a weighty reason for the Company’s decision, because the purpose of the option program is to ensure the commitment of the company’s key personnel to new duties. The authorization is valid until further notice and it cancelled the option authorization decided on 30 March 2016.
Under the authorization granted to it, the Board of Directors decided on 20 December 2018 about a new option program under which a maximum of 20,000 option rights are offered for subscription. The option rights grant the right to subscribe for 20,000 of the company’s new or treasury K series shares in total. The subscription period for the shares is 1 May 2021 – 31 December 2026.
In 2018, Annual General Meeting decided to issue a share option plan for the Board of Directors of the parent company. According to the conditions of the share option plan, the options were granted without consideration to the members of the Board of Directors so that each individual member can receive a maximum of 500 options. The share option program is part of ensuring the commitment of the members of the Board of Directors and thus, there is a weighty financial reason from the company’s point of view. The option rights grant the right to subscribe for a maximum of 3,000 of the company’s series K shares in total. In connection with the option arrangements, 2,500 new series K shares were subscribed for in 2019, and the subscription price received has been recognized in the invested unrestricted equity fund of the company.
LOANS TO RELATED PARTIES AND RESPONSIBILITIES
The Company does not have related party loans at the end of the financial period.
SIGNIFICANT EVENTS AFTER THE END OF THE FINANCIAL PERIOD
Since the end of the financial period, there have been no material changes in the Company’s operations and financial position.
ASSESSMENT OF LIKELY FUTURE DEVELOPMENTS
The Company’s management predicts that the revenue will grow in the current market areas also in 2020, thanks to development measures that accelerate growth. It is predicted that profitability will remain good despite growth investments.
The Company operates with a network business model in the manufacture and distribution of products. The aim is to prevent business risks by identifying risks. In 2019, particular focus has been placed on ensuring the availability of components so that the Company’s capacity to honor supply contracts can be secured.
Due to the nature of the company’s security products, product-related risks are prevented through thorough product testing, both internally and by external testing institutions, as well as high-quality operations at all stages of product development and manufacturing.
The above-mentioned and other business risks are also covered by insurance policies, in addition to the development of operational processes. The Board of Directors is not aware of any judicial or credit loss risks that would substantially affect the Company’s performance.
QUALITY AND ENVIRONMENT
The Company has a certified ISO 9001:2015 quality system and ISO 14001:2015 environmental management system. The Company’s iLOQ S10/S50 SaaS service is produced by Fujitsu Services Oy, whose information security management system has been certified in accordance with ISO 27001:2013.
SHARES OF THE COMPANY
The Company’s share capital is divided as follows:
All shares have equal rights to dividends and company assets.
The Company has 5,300 treasury shares on 31 December 2019.
BOARD OF DIRECTORS’ PROPOSAL FOR PROFIT DISTRIBUTION
iLOQ Oy’s distributable equity was EUR 13,996,281.92 on 31 December 2019 of which profit for the period amounted to EUR 5,662,620.64. The company’s distributable equity is divided into invested unrestricted equity fund EUR 5,301,132.20 and earnings, EUR 15,028,451.13. The distributable funds are reduced by capitalized development expenses totaling EUR 6,333,301.41.
The Board of Directors proposes to the Annual General Meeting that the profit for the financial year 2019 is transferred to the profit and loss account and that no dividends are paid out.
Since the end of the financial period, there have been no material changes in the company’s financial position. The company’s liquidity is good and, in the view of the Board of Directors, the proposed distribution of profits and capital repayment will not endanger the company’s solvency.
The Company’s auditor has been auditing firm KPMG Oy Ab, Authorized Public Accountants, with Tapio Raappana, APA, as the principal auditor.