VIGO System S.A. (WSE: VGO), a global manufacturer of the most advanced photonic mid-infrared detectors, modules dedicated to these detectors and semiconductor materials, published its annual report for 2021. Last year, the Company generated the highest financial results in its corporate history: PLN 71.5 million in sales revenue (+33.8% y/y), PLN 29.1 million in adjusted EBITDA (+19.1% y/y) and PLN 24.3 million in adjusted (cleared of the impact of deferred income tax) net profit (+34.5% y/y) – with high margins maintained. The company also generated strong operating cash flow of PLN 24.1 million. In 2021, VIGO published a new development strategy for the years 2021-2026 containing 6 significant development initiatives, the implementation of which is expected to bring the Company PLN 100 million in sales revenues and an EBITDA margin of approximately 40% in 2023.
In 2021, revenue growth of PLN 71.5 million was achieved thanks to increased sales of products and services in the Detection Modules segment, amounting to PLN 67.1 million (+30.5% y/y), and in the Conductor Materials segment, which reached PLN 4.2 million (+125% y/y). The most significant impact on the results generated in the sales of detectors and detection modules was the execution of two orders for customers in the construction machinery as well as space and defence industries, which together brought the Company a total of EUR 7.7 million in 2021. Last year, VIGO enhanced the value of sales to customers in Europe (+54.5% y/y) and in the Asian market, where 43 new customers were acquired.
In 2021, the breakdown of product and service sales by application was as follows:
- industry (43.5%) with detectors for gas analysers
- military applications (32.4%) with detectors for smart munitions control systems and laser targeting warning systems
- rail industry (12.2%) including fault detection systems for high speed railways
- semiconductor materials (6%)
- scientific and medical applications (5.5%)
It is worth emphasising that the promising semiconductor materials segment, which the Company plans to develop dynamically, recorded more than double year-on-year growth. The Company also generated high cash flows from operating activities, which amounted to PLN 24.1 million compared to PLN 21.2 million.
– The financial results achieved in 2021 already partly take into account the strategic changes we announced in June. Historically, this has been the best year for the Company in terms of financial results generated. We are not stopping there and intend to successively increase the performance in subsequent periods, based on the implementation of the most promising development initiatives that we have identified in the new development strategy. We continue to actively work on the launch of new products, including in the area of semiconductor materials, which has high growth potential in the coming years. Parallel to this segment, together with our customers we are developing projects concerning EEL or VSCEL laser structures. We are also focusing on the area of low-cost sensing modules and chips made of III-V materials, which will translate into sales as early as 2022. We can already see that these efforts bring the expected results – says Adam Piotrowski, CEO of VIGO Photonics S.A.
Sales were also supported by the international distributor network built by the Company. Five new entities joined the network last year. They are responsible for sales and promotion of VIGO technology and products on Scandinavian (Nanor AB), Australia and New Zealand (Lastek), India (Dynotech), and DACH region (Acal BFI) markets. The company has also established cooperation with a global distributor – TME. At the same time, VIGO intends to create its own branches in key foreign markets. Last year, a subsidiary was established in the United States and a year earlier – in Taiwan.
NEW OBJECTIVES IN THE NEW DEVELOPMENT STRATEGY
In 2021, VIGO presented a new, two-stage development strategy for 2021-2026, in which six development initiatives or technological areas were singled out in order to strengthen the Company’s position as one of the most innovative and dynamically developing companies on the market. By 2023, the Company’s objective will be to continue the R&D projects initiated in the field of photonic technologies, integrated circuits, detectors made of III-V materials, epitaxy of semiconductor materials and infrared source technologies. The technological and technical base will be enhanced. The development strategy will allow the Company to maintain a 20-30% annual growth rate and is expected to generate revenues of approximately PLN 80 million in 2022 and PLN 100 million in 2023. EBITDA at this stage is expected to grow to approximately PLN 40 million in 2023. The second stage of the strategy will be implemented up until 2026 inclusive and will consist in the implementation of selected development initiatives.
– In the first stage, we will carry out development work in order to select from among the areas we are working on those which are the most promising in business terms. Therefore, we have planned to invest PLN 30-40 million annually in the development of our infrastructure until the end of 2023. The funds for this purpose are also to come from the co-financing obtained as well as from public programmes. Strengthening the market position of VIGO as a company operating in the high-tech industry and wishing to maintain its competitive advantages requires investments in the infrastructure, expanding facilities and production capacity, enabling flexible production planning and product customisation. Reducing unit manufacturing costs will allow us to increase the production scale and shorten the lead time. Currently, we are completing work related to the launch of a new cleanroom, which should be ready later this month. Thanks to this facility, we will be ready to increase the repeatability of production and the production of detection chips. Plans for this year also envisage further development on all the initiatives outlined in the Strategy, including integrated circuit technology as well as infrared detector arrays. These projects are still at an early stage of technological maturity, but in the future they will have a very significant impact on the Company’s revenues – says Łukasz Piekarski, Member of VIGO Photonics S.A. Management Board
Last year, the Company’s capital expenditure amounted to PLN 49.6 million and was mainly related to R&D work, the redevelopment of the cleanroom, the purchase of machinery for manufacturing products and the replacement of the old infrastructure with modern equipment. The investment programme was realised using operating cash flow, bank loans and subsidies from public funds.
BUILDING VIGO’S STRONG POSITION IN INTERNATIONAL MARKETS
Along with the introduction of a new strategy, it has been decided to rebrand from VIGO Photonics to VIGO Photonics.
– Establishing new assumptions for our development path mobilised us to implement more extensive changes. We decided to change the brand to VIGO Photonics. The new brand will be more legible for our potential customers as it directly points to the areas of our specialisation. We started the rebranding process at the end of 2021 and we are planning to complete it both officially and formally in June this year. For a while we will be functioning under two names, but we are already getting our customers and business partners used to the new one: VIGO Photonics – says the CEO of VIGO Photonics S.A.
The new name is not the only marketing activity pursued by the Company last year. VIGO actively promoted its technology by participating in 10 international conferences and trade fairs, including the most prestigious ones, such as PHOTONICS+, OPIE – Optics & Photonics, Photonics WEST Digital Forum.
The uniqueness and advantages of VIGO products are more and more recognised on the market. The Company may boast of many awards and distinctions in the area of its activity. Forbes Diamond 2021 title in the category of the fastest growing companies in Poland with revenues of PLN 50-250 million or nomination for Dr Adam Piotrowski – the president of the Company to the title of EY Entrepreneur of the Year in the 19th edition of the competition are definitely worth mentioning.
IMPACT OF THE WAR IN UKRAINE ON THE COMPANY’S OPERATIONS
In the management report, the Company referred to the current political situation and the ongoing war in Ukraine. In 2021, sales of VIGO products to Russian customers generated PLN 244 thousand, which is a small share in total revenues and accounts for only 0.3%. In previous years, sales to that market were at the level of PLN 100-150 thousand per year.
The Company has indicated that it has decided to stop selling its products to customers in the Russian Federation region.
– Given the share of exports to these countries in our overall sales, the export ban will not have a material impact on the Company’s results in the current year. Other than that, we anticipate that there may be issues with the timeliness of deliveries or reduced purchasing options for certain components. We have already started looking for alternative suppliers and we are also working with other suppliers on changing the location of component production – Adam Piotrowski informs.
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