Colt CZ Group SE reported that 2023 was the second most successful year in the history of the Group, but results still fell short of initial expectations plans, according to company Chairman and CEO Jan Drahota.
“We significantly increased our share of sales to the military and law enforcement market, acquired Swiss ammunition manufacturer swissAA Holding AG and announced the signing of an agreement with CBC Europe to acquire 100 percent of Sellier & Bellot,” Drahota commented. “However, I must say that in terms of financial results, last year ended behind my initial expectations and plans. We are constantly working on modernization of our product portfolio and we expect a significant increase of our performance in 2024 “In view of the results achieved, the company’s Board of Directors has decided to propose to the General Meeting a dividend of CZK 30 per share.”
Colt CZ Group reports in the Czech Koruna (CZK) currency.
Group revenues amounted to CZK 14.86 billion in 2023, an increase of 1.8 percent year-over-year (YoY).
- Revenues generated in the Czech Republic in 2023 increased 36.1 percent YoY to CZK 2.6 billion, said to be mainly due to the deliveries to the Czech Army under the framework contract.
- Revenues generated in the U.S. decreased 10.2 percent YoY to CZK 6.3 billion in 2023, as a result of the slowdown of the U.S. commercial market, mainly in the first half of the year.
- Revenues in Canada reached CZK 2.2 billion in 2023, up 25.8 percent YoY. A significant portion of these revenues was said to be related to the Canadian government’s support for Ukraine.
- Revenues generated in Europe (excluding the Czech Republic) increased 22.2 percent YoY to CZK 1.9 billion in 2023, and were also driven by consolidation of revenues of Swiss ammunition manufacturer swissAA.
- Revenues generated in Africa declined 23.6 percent to CZK 186 million in 2023.
- Revenues generated in Asia declined 23.8 percent YoY to CZK 1.1 billion in 2023 as large sales to the military and law enforcement customers took place in the previous year.
- Revenues from sales to other parts of the world reached CZK 481.2 million in 2023, down by 19.1 percent YoY.
The number of firearms sold in 2023 decreased by 10.4 percent compared to 2022, reaching 621 thousand units sold, primarily due to lower demand in the U.S. commercial market.
The company said the major increase of sales for 2023 was recorded mainly in the M&LE segment of the business. Total revenue was affected by the impact of FX translation of foreign currencies into CZK, the time-consuming procedures for granting the export licenses and also the decline of some product segments on the U.S. commercial market. Due to the increase of share of the M&LE sales on total revenues, the quarterly seasonality of sales has reportedly increased. The last quarter of 2023 was historically the most successful quarter in terms of revenues.
In 2023, EBITDA (including extraordinary items) declined 14.3 percent to CZK 2.7 billion compared with the prior year, primarily due to decline of operating profit (EBIT). The decrease was said to be driven by the decline of some product segments on the U.S. commercial market, seasonality of sales in the M/LE segment (dependent on licensing process) but also by the partial increase of input prices of commodities and materials, increased personnel expenses connected among others to the regular wage increases based on the newly signed collective agreements in the Czech Republic and in the U.S. and higher cost of services related to marketing activities in the commercial market in the U.S.
The adjusted EBITDA in 2023 amounted to CZK 3.0 billion, down 9.4 percent year-over-year. In 2023, EBITDA was adjusted by one-off items related to unrealized acquisitions (mainly Vista Outdoor), and payments related to the employee stock option plan which are not related to operational performance and value creation in the given period.
As reported by SGB Media, Colt CZ on November 22, 2023 made a cash-and-stock merger offer to acquire Vista Outdoor for $30 a share, or $1.74 billion. Czechoslovakia-based Colt CZ’s proposal called for keeping the company together, scrapping plans to separate Vista’s Sporting Products and Outdoor Products businesses. Vista Outdoor rejected the offer.
In October 2023, Vista reached an agreement to sell the Sporting Products segment, including CCI, Federal, Hevi-Shot, Remington, and Speer, to Czechoslovak Group (CSG), a defense-oriented firearms company also based in Czechoslovakia. The all-cash deal was valued at $1.9 billion on an enterprise value basis, which includes debt.
EBIT increased 6.5 percent YoY in 2023 to CZK 2.5 billion. The growth reportedly relates to the positive results from the financial operations and one-off item – profit from the bargain purchase (negative goodwill) in connection with the acquisition of swissAA.
Net Profit after tax in 2023 inched up 0.4 percent to CZK 2.0 billion compared with the prior year, said to be due to the positive results from the financial operations and on-off item – profit from the bargain purchase in connection with the acquisition of swissAA.
Adjusted net profit after tax in 2023 decreased 10.1 percent to CZK 2.0 billion compared with the prior year.
Investments
The Group’s cash capital expenditures were CZK 924 million in 2023, up 36 percent year-over-year. This represents a 6.2 percent share of the total revenues, which the company said is slightly higher than the published 2023 guidance (approximately 5 percent of 2023 total consolidated revenues). Reasons of the higher capital expenditures were reportedly investment in the production capacity in swissAA in the last quarter of 2023 (swissAA Group has been consolidated since July 1, 2023) and also the acquisition of the intellectual property rights for the Mk 47 automatic grenade launcher from General Dynamics Ordnance and Tactical Systems which was signed by Colt USA in December 2023.
2024 Guidance
Colt CZ Group said that its guidance for full year 2024 will be further influenced by a number of external factors that affected the Group´s financial results in 2023. These are primarily
- the development of demand on global markets, in the USA and in the Czech Republic (also in the context of the ongoing conflict in Ukraine), and
- further inflationary pressures on the cost side; and 3) impact of FX translation of USD and EUR into CZK.
In addition, the outlook for financial results in 2024 will be affected by the anticipated consolidation of the acquisition of Sellier & Bellot in progress, for which the company is now relying solely on data obtained during the due diligence. The outlook will therefore be reviewed in the course of 2024, depending on the development of financial results of today’s Group as well as the new acquisition.
The capital expenditures of the Group in 2024 could reach CZK 1 billion to 1.2 billion, which corresponds to a roughly 5 percent share of the 2024 expected revenues and which is in line with the medium-term target of the company.
The acquisition of Sellier & Bellot is developing in line with the proposed timetable. The General Meeting of Colt CZ Group held in February 2024 approved the capital increase via a new issue of ordinary shares of Colt CZ, which will result in the acquisition of approximately 27 percent to 28 percent stake in Colt CZ by the selling shareholder CBC after the closing of the acquisition. The transaction is subject to regulatory approval in various countries. A number of these approvals have already been obtained and the acquisition is expected to be completed during by the end of the first half of 2024.
Proposed Dividend Payment
The company will propose a dividend payment of CZK 30 per share from its net profit for 2023. Same as last year, shareholders will be able to choose between a cash dividend and stock dividend, based on their discretion. The dividend payout is subject to the approval by the General Meeting which will be held by the end of the first half of 2024.
About Colt CZ Group
Colt CZ Group (Colt CZ) is a leading manufacturer of firearms and ammunition for military and law enforcement, personal defense, hunting, sport shooting, and other commercial use. It markets and sells its products mainly under the Colt, CZ (Česká zbrojovka), Colt Canada, CZ-USA, Dan Wesson, Spuhr, swissAA, and 4M Systems brands.
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See additional SGB Media coverage of Colt CZ M&A activity below.
