Brødrene A & O Johansen A/S vs Sun Team A/S – A brief comparability

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I all the time sought after to have a snappy take a look at A&O and used to be in any case motivated once more studying about it a number of instances in my Twitter timeline. In my All Danish Shares sequence, A&O didn’t make the minimize as a result of I had already Sun within the portfolio, however nonetheless I wish to take a look at them as this steadily yields some insights into the opposite corporate.

Each corporations are headquartered in Denmark and in idea distribute provides for craftsmen/installers.  

From what I perceive, Sun Team is targeted a little bit extra on electric apparatus, A&O has a broader collection however eager about renovation and reworking. A&O Johanson has a small B2C phase that makes up ~12% of gross sales however much less in income, as margins in B2C are smaller.

A&O is energetic in Denmark, Sweden and Norway, alternatively 90% of gross sales appear to be in Denmark. A&O has a twin proportion construction, with “tremendous vote casting” stocks owned through the circle of relatives and CEO giving copntrol to the circle of relatives. Additionally Sun Team has a twin proportion elegance construction, with nearly all of the votes owned through the heirs of the unique founder (4th era).

Sun  is energetic additionally in Denmark, Sweden and Norway, but additionally has a sizeable trade within the Netherlands and Poland. Denmark is round ⅓ of gross sales and 45% of income for Sun. With the exception of craftsmen(installers, 33% in their gross sales cross to commercial shoppers and a small “industry” phase. Apparently, the craftsmen/installer phase is the bottom margin phase.

In 2023 they obtained a warmth pump trade (huge pumps for trade), so they’re branching out to a undeniable extent into production. This is obviously a possibility however SFS for example displays that an organization can do each effectively.

Numbers, numbers, numbers

Listed here are quite a lot of KPIs that I discovered fascinating to check with some colour coding hooked up:

Each corporations glance very affordable on 2022 numbers and feature first rate go back on capital which is reasonably essential for vendors.

Something that sticks out is that Sun has been incomes a lot upper margins lately than some years earlier than. In my figuring out the cause of that is that as much as 2017, Sun used to be principally a turn-around case they usually introduced in a brand new CEO to make things better.Going via the yearly reviews since then, there’s a transparent effort (and luck) in focusing the trade and making it step by step extra winning annually.

The primary distinction between Sun and A&O is that Sun turns out to hold extra stock, while A&O has much more fastened belongings. Sun is extra capital environment friendly (even with out the goodwill) and due to this fact decrease margins however translate into upper ROCEs and ROEs in spite of somewhat decrease leverage.

Each corporations are suffering a little bit bit this yr, apparently Sun Team greater than A&O after depreciation. Alternatively, when taking a look at Money float, issues glance other: Sun has controlled to go back to certain Working cashflow while A&O had nonetheless adverse running CF. I’m really not positive why and this would flip temporarily however it’s one thing to look at.

Sun has been writing off Goodwill reasonably aggressively within the first 6M, alternatively there is not any detailed clarification. A&O doesn’t display amortization one at a time within the 6M numbers.

Inventory Efficiency (incl. Dividends):

Those are the Overall go back charts from NAsdaq Nordic, sadly I discovered no method to display them in a single chart. Over 10 years, A&O has obviously outperformed Sun. 

I assume the primary reason why is that Sun made a loss in 2014 and no income each in 2017 and 2019. A&O obviously has the extra constant monitor report.

Capital allocation smart, each corporations appear to prioritize dividends earlier than proportion purchase backs.

Abstract:

General, I believe each are excellent corporations. A&O has an excellent Denmark targeted technique while Sun has a extra advanced trade type with other buyer teams and jurisdictions. Alternatively, this may also permit them to search out extra enlargement alternatives.

A&O has a greater longer term monitor report, alternatively Sun’s trajectory for the reason that CEO exchange in 2017 is reasonably encouraging and the turn-around turns out to were showed.

For each corporations, buyers perhaps suppose that they have got hugely “over earned” in 2021 and 2022, in a different way the only digit P/Es for those in reality great distribution companies with excellent returns on capital make no sense. They’ll obviously see some headwinds if building slows down however in my figuring out, each corporations have restricted publicity to new construction building.

I’ll due to this fact stick to Sun in the intervening time, however will observe A&O as neatly. This appears to be additionally an affordable however just right high quality trade “below the radar” of many buyers and will have to do each neatly over the following 3-5 years in spite of important brief time period headwinds.

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