As this year marks a special anniversary in our Company’s history, we are proud to reflect on 125 years of excellence. We continue to serve our customers with unwavering dedication, leading-edge technology and the passion to manage energy better.
This past year has posed many challenges, but it also exemplified Landis+Gyr’s strengths as the pandemic has demonstrated the relevance of our offering. As energy consumption patterns changed virtually overnight, we were able to successfully support our customers to ensure communities around the globe were able to adjust to a new normal quickly and efficiently.
In addition, our solid balance sheet with a substantial cash position has proven resilient throughout the pandemic and we have carefully managed cash and liquidity. Our restructuring and streamlining initiative Hermes was implemented swiftly, allowing us to remain nimble and ensure that we can act from a position of strength as we continue to manage the current crisis. As an essential business with mission-critical infrastructure equipment and services, we continue to be committed to our customers’ success and we are pleased to say that, although some utilities had to suspend installations temporarily, we have seen no major project cancellations and software and services contracts continued uninterrupted. This allows us to look to the future optimistically as we believe that the downturn in the markets we serve is of temporary nature.
Furthermore, we are actively driving our Company’s transformation to achieve profitable growth in our three strategic pillars Smart Metering, Grid Edge Intelligence and Smart Infrastructure. With increased focus on strategic initiatives, such as our seven-year partnership with Google, the development of Smart Water and Smart Gas as well as acquisitions like Rhebo, True Energy and soon also Etrel, we are strengthening our position in the market. As a result, we ensure that we are well equipped to remain a leading force in the future of energy while doing so in a sustainable way as we continue to invest in efforts to decarbonize the grid and elevate our Environmental, Social and Governance (ESG) efforts.
Financial Year 2020 Results
The financial year 2020 results reflect the current challenging economic environment. Despite 20.8% revenue decline year-over-year in constant currency to USD 1,357.4 million, we were able to achieve a 10.3% Adjusted EBITDA margin of USD 139.6 million and produced a solid free cash flow of USD 97.6 million. In Asia Pacific we were able to slightly grow the topline, while the Americas and EMEA faced headwinds, impacted primarily by the COVID-19 crisis, further delaying regulatory project approvals in the Americas region, and temporarily suspending installations in other key markets, such as the UK. Order intake for FY 2020 was USD 1,298.7 million, a book-to-bill ratio of 0.96. Committed backlog was down 2.6% year-over-year at USD 2,165.9 million. The Americas and EMEA reported decreases in committed backlog compared to the prior year, while Asia Pacific rose slightly.
We have undertaken strict cost control measures throughout the organization, while maintaining key portfolio investments. This allows us to strengthen our position for the future and we are excited about the transformation we are driving to serve our customers even better and to create sustainable shareholder value.
For financial year 2020, a progressive dividend of CHF 2.10 per share will be proposed to the Annual General Meeting in June 2021, after a dividend of CHF 2.00 had been paid for FY 2019. The share buyback program remains suspended.
Fostering a Culture of Excellence
With a renewed leadership team, we are continuing to drive leading-edge innovation, the strategic transformation of our portfolio and the expansion of our offering in integrated energy management solutions.
On April 1, 2020, Werner Lieberherr was appointed as the Chief Executive Officer and his global leadership experience in multiple industries is instrumental in our strategic transformation. On November 16, 2020, Elodie Cingari joined the Company as the new Chief Financial Officer, taking over from Jonathan Elmer who subsequently went into retirement.
Especially in light of the challenges presented by COVID-19, our teams across the globe have demonstrated a high level of resilience and shown an amount of dedication towards customers and each other that deserves recognition. Therefore, we would like to thank our over 5,000 global employees for their continued dedication, passion and entrepreneurial spirit to solidify our leading position and ensure continuous leading-edge innovation, customer satisfaction and speed to market.
Creating the Future on a Solid Foundation
Reflecting on 125 years of excellence, we look to the future optimistically. With our focus on creating value for our customers and shareholders, we are excited about the transformation of Landis+Gyr. Our strategy is designed to broaden our core offering of Smart Metering and further expand our reach in Grid Edge Intelligence and Smart Infrastructure with the objective to transform the business and to position Landis+Gyr for mid- and long-term profitable growth.
Essential to this is solidifying our position with a sharp focus on execution and a commitment to continue investing in R&D, while recovering from COVID-19 effects. Additionally, we are proud to have joined forces with Google Cloud to combine their leading capabilities in data analytics, artificial intelligence and machine learning with our leading expertise in Smart Metering and Grid Edge Intelligence. This multi-year strategic partnership will position us well to remain at the forefront of technological advances. By enabling utilities to manage grid operations with increased visibility, while empowering consumers to utilize energy in a more informed and sustainable way, this partnership will advance our efforts in Smart Infrastructure, enabling smart cities and doing so in a secure and reliable way. By partnering with Google Cloud, this groundbreaking endeavor will drive our mission forward to manage energy better – together.
Furthermore, the acquisition of Rhebo, a leading technology start-up offering cyber-security solutions for Operational Technology (OT) and IoT networks in industry and critical infrastructure, enables anomaly and threat detection down to the grid edge, which is critical for utilities as they modernize the grids. As such, Rhebo elevates our cybersecurity offering and is therefore a perfect fit for our cybersecurity strategy.
In addition, the recent acquisition of True Energy at the beginning of financial year 2021 and the forthcoming acquisition of Etrel, which we expect to close at the end of June, will drive growth through electric vehicle (EV) infrastructure technology. We can build on our strong market position and leverage our close relationships with the leading utilities in key markets by expanding our offering with EV charging hardware and smart charging software, including demand response and flexibility management to allow utilities to better manage the grid.
Outlook for FY 2021
For financial year 2021, we expect organic net revenue growth of between 7% and 11% predominantly driven by EMEA with inorganic growth coming on top. As announced at the Capital Markets Day 2021, we are making significant investments of approximately 2% of net revenues resulting in temporary higher expenses (incl. R&D) to foster future growth by supporting strategic initiatives, such as the partnership with Google, the organic development of ultrasonic Smart Water and Smart Gas portfolios, and the digital transformation of our Company.
Further, operating expenses are expected to increase due to the reversal of COVID-19 related effects, such as furlough, government schemes and travel & entertainment. Adjusted EBITDA margin is expected to be between 9.0% and 10.5% of net revenues. Free Cash Flow (excluding M&A) is expected to be between USD 80 million and USD 100 million.
Industry-wide supply chain constraints, in particular global shortages of electronic components and plastic resins as well as increased freight rates, pose challenges for cost and on-time delivery performance, especially in the first half of financial year 2021. Our teams are committed to support customers and mitigate potential impacts through effective supply chain management.
In advance of this year’s Annual General Meeting, we are pleased to announce that all current members of the Board of Directors, with the exception of Pierre-Alain Graf, who is no longer available for re-election as a member of the Board of Directors, stand for re-election at this year’s Annual General Meeting. The Board of Directors proposes that the Annual General Meeting elects Laureen Tolson as a new Member of the Board of Directors for a one-year term of office until the conclusion of next year’s Annual General Meeting. Laureen Tolson, a US citizen, currently holds the position of Chief Executive Officer at Tolson Consulting Company and is a Board Member at Delek US Holdings and at Fenix Marine Services. She is an International Institute for Management Development (IMD) graduate, Lausanne, Switzerland; and earned a Master of Business Administration at National University, San Diego, CA, USA and a B.A. in Business Administration and Economics, Minor Computer Science from Pt. Loma Nazarene University, San Diego, CA, USA.
Embracing Change for a Greener Tomorrow
Actively driving sustainable impact is not just what we do, but who we are. Our strategic vision is driven by the desire to provide unrivaled customer value as the leading partner for integrated energy and resource management solutions with sustainability at the heart of everything we do. Our comprehensive portfolio of products and services uniquely positions us to empower utilities, energy consumers and communities by helping them to reduce their CO2 footprint. In addition, we have made the commitment to be Carbon Neutral by 2030. We are also proud to have signed up to the UN Global Compact and of reporting our sustainability initiatives according to the GRI core requirements for the first time in our most recent Sustainability Report. In financial year 2020, we introduced an ESG component of 10% in our short-term incentive for all bonus-eligible employees, driving sustainable progress in support of the UN Sustainable Development Goals. The weight of the ESG component was raised to 20% for financial year 2021. Further, receiving the EcoVadis Gold Award, being rated in the top 5% of sustainable companies, fills us with pride and encourages us to passionately drive our ESG initiatives for lasting sustainable impact.
Our customers’ ambitions to serve communities around the globe with safe and reliable energy and to decarbonize the grid, inspire us every day and we want to thank our customers and partners for their continued trust and partnership.
As we celebrate 125 years of success this year, we are excited about our transformational journey and continue to focus on offering leading innovative technology to our customers, expanding our strong partnerships, driving profitable growth and, thus, contributing to sustainable global development. On behalf of all of us at Landis+Gyr, we thank you, our shareholders, for your continued support and ownership in Landis+Gyr, and that you have joined us in driving our mission to manage energy better.
