Coor as an investment
An investment in Coor is an investment in a leading service company with stable growth, good profitability, healthy cash generation and a historically high dividend yield.
Coor’s leading position in the IFM segment, which accounts for around 60 per cent of the company’s business, is creating good prospects for continued growth, as the IFM market is growing significantly faster than GDP and the FM market as a whole. In the short term, growth may vary somewhat, as it is affected by the volume of major IFM contracts coming into the market in any particular period as well as by major unexpected events such as the pandemic.
Coor has a strong position in the Nordic market, where the company is a front runner in terms of innovation and digitisation. Under Coor’s business model, a large part of the company’s revenue is relatively stable in the form of subscriptions, which account for over 70 per cent total revenue.
The company’s services are also in demand regardless of the economic climate. In a strong economy, the volume of FM services in the company’s existing contracts increases, but due to the significant savings potential which Coor offers its customers the company also remains an important partner in times of slower economic growth. Historically, periods of weaker economic growth have led to new outsourcing deals reaching the market.
As Coor’s business is largely about delivering efficiencies, the company has a strong focus on efficiency improvements and cost savings. The combination of strong local management in customer contracts and increased use of synergies within the Group provides a good foundation for maintaining stable profitability.
The company also has a relatively flexible cost base, as was shown during the pandemic. This means that fluctuations in sales normally have a limited impact on the operating margin.
A high dividend yield
Available cash can be used for further acquisitions, repayment of debt or dividends. Any acquisitions are expected to be relatively minor, however, and net debt is below the company’s target. This means that Coor should be able to offer a high and stable dividend yield to its shareholders over time. The objective of the Board and management is not to accumulate cash in the company but to return any surplus to the shareholders.
Long-term customer relationships
Coor has historically had a high success rate in terms of renewing and extending customer contracts and works continuously to maintain and develop its customer relationships. The goal is to have satisfied customers who want to renew their contracts.
In 2020, a number of large contracts were renegotiated, including those with Coop, Hemsö, Equinor offshore, DNV Eiendom and Akelius. The portfolio encompasses companies from all industries. The retention rate for the year was 92 per cent. Coor’s retention rate for the past three years is 92 per cent.
Strong cash conversion
Due to its very limited need for capital expenditure and working capital, Coor’s cash conversion is strong, which means that a large portion of its operating profit is converted into cash flow.