Opportunities in the sale of end-user equipment
Origo is one of the largest retailer of end-user equipment in Iceland and provides a large number of customers with computer equipment that increases efficiency and performance for work and leisure. Revenue from end-user equipment and related services rose in the past year, partly because Origo enhanced its solution offering with the acquisition if two operating units, Strikemerki and Tölvutek. Profitability from sales of end-user equipment was unsatisfactory however and has been for a while.
Sale of end-user equipment is the foundation of our relationship with a large number of customers and as such is important for both them and us. Nevertheless it is clear that we expect better performance from this segment and see significant opportunities for improvement. Indeed, Origo has a sound revenue stream, a large group of loyal customers and very strong international brands. Furthermore, there are interesting opportunities on the horizon relating to forthcoming technological changes, such as the introduction of 5G which will transform the potential for use of the Internet of Things and drive demand at the same time. Strategic efforts have been made to improve results in this area and with a new structure and a team of highly experienced employees, we are confident that results from sales of end-user equipment will be positive in the new year and sound in the coming years.
Sale of end-user equipment is the foundation of our relationship with a large number of customers and as such is important for both them and us.
Origo as a backer in digital transformation
Directors of companies and institutions are always striving to do better; make better use of capital, accelerate services or improve their quality. In today’s business environment, where data processing for decision-making or operational automation is key to success, it is challenging or even impossible to optimise business processes without using information technology in one way or another. We see this very clearly in the strategies of most companies, where digital transformation is prioritised, but this new and popular term effectively refers to the use of information technology to optimise business processes.
An important benefit of Origo’s business model lies in the variety of services we can provide our customers. Within the company there is extensive knowledge in almost all areas of information technology, from hardware, to operations, consultancy, software solutions and development. In addition, we have developed and implemented solutions for numerous industries, such as financial services and travel and healthcare services, to support digital transformation and modernize services. In light of this, and the fact that streamlining of business is primarily based on information technology, Origo is in a key position to support our customers on their journey to digital transformation. We believe that we are the first choice for such collaboration, as evidenced by the recognition of our partners and the impressive group of customers that we get to work with and support each and every day. Looking at the needs of the business community and the projects that Origo specializes in, there is good consistency which gives rise to optimism when looking ahead.
Benefits to shareholders
Looking at recent years, it can be said that Origo’s operations and development were successful. Earnings have been positive every year since 2014 and in that time, the Company’s market value has increased by almost ISK 10 billion, which is nearly tenfold. This success is based, among other things, on increased operating stability, integration of operations, investment in a new brand, human resources and development work aimed at building valuable assets that generate long-term profits for the Company. Origo’s sale of a 55% stake in Tempo to Diversis Capital at the end of 2018 was an important final step in the process of establishing sound financial foundations for the Company.
Looking at recent years, it can be said that Origo’s operations and development have been successful.
It is particularly gratifying that, on the basis of this successful work, we have been able to deliver significant benefits to shareholders in the form of dividends and repurchase of shares. At last year’s Annual General Meeting, dividends were paid to shareholders in the amount of ISK 1,000,000,000 but in addition the Company has over the past two years repurchased over 34 million shares, amounting to about ISK 853,000,000 in market value. In accordance with Origo's dividend policy, the Board of Directors proposes to the Annual General Meeting 2020 that a dividend of ISK 180,000,000 be paid to shareholders and that share capital be reduced by ISK 24,600,000 in nominal value. Furthermore, the Board proposes to the Annual General Meeting that authorization to repurchase shares be extended.
It is the objective of Origo’s Board that the Company’s capital structure is always sufficiently robust to support growth and development, among other things through acquisitions of other operating units, and the financial position must provide protection against economic downturns. Accordingly, the Board has assumed that excess capital will be used on the one hand to support growth and value creation, and on the other hand, that it is delivered to owners through annual dividends and share repurchases. The aim is for the net interest-bearing debt ration to range between 0.5-2 * EBITDA and that between 20-40% of profits for each year is paid out in dividends.