Concentric announces new financial targets and a strategy update

Financial targets

+-----------+--------------------------------------+-------------------------+
|           |New (over next five years)            |Old (over business cycle)|
+-----------+--------------------------------------+-------------------------+
|Organic    |6 percentage points p.a. above market*|7%                       |
|sales      |                                      |                         |
|growth     |                                      |                         |
+-----------+--------------------------------------+-------------------------+
|Operating  |≥ 16%                                 |11%                      |
|margin     |                                      |                         |
+-----------+--------------------------------------+-------------------------+
|Net        |50% ≤ ND/E ≤ 150%                     |<100%                    |
|Debt/Equity|                                      |                         |
|           |                                      |                         |
+-----------+--------------------------------------+-------------------------+
|Dividend   |33%                                   |33%                      |
|payout     |                                      |                         |
|ratio      |                                      |                         |
+-----------+--------------------------------------+-------------------------+

* Blended market growth estimated 2.5%

David Woolley, President and CEO of Concentric AB comments:

“Concentric is now increasing its efforts to boost sales and we have set some
ambitious targets for ourselves. We want to grow significantly faster than the
market while maintaining our high margins. We now have dedicated resources in
place to identify potential acquisition targets that enhance our product
offering or strengthen our geographical footprint within both engine and
hydraulic products. We estimate that we can adequately serve net debt amounting
to 150% of the current equity levels which implies that there is additional debt
capacity of MSEK 750-800 readily available for potential acquisitions without
compromising our dividend policy. At the same Concentric remains well positioned
both financially and operationally to continue to grow organically."

Strategy update

Financials

  ·
The company will continue to distribute surplus net cash in order to maintain
the current gearing ratio (including pension liabilities) of at least 50%

  ·
The company has additional debt capacity of MSEK 750-800 readily available for
potential acquisitions without compromising the dividend policy and staying
within a maximum gearing ratio of 150% of the current equity levels

  ·
Net share buybacks are projected to be more than MSEK 100 by end of Q3 2014
(MSEK 62 at end of Q2 2014)

Engine products

Concentric will leverage its market leading positions to:

  ·
Target the next generation engine platform, deriving from tougher emission and
CO2 legislation

  ·
Exploit its innovative engine products

    ·
2-speed water pump clutches: forecasted volume ∼120,000 units in 2014 and
∼200,000 units in 2016

    ·
Alfdex oil mist separator for heavy duty engines: forecasted volume of over
400,000 units in 2014; compact separator has also been developed to meet the
requirements for medium duty engines

    ·
Potential for variable flow oil pumps: Concentric’s forecasted worldwide
production volume of the conventional oil pumps for medium/heavy duty engines is
∼500,000 units in 2014

  ·
Explore long-term growth opportunities by growing with existing customers in
emerging markets

Hydraulic products

Concentric will leverage its niche position to:

  ·
Exploit innovative products that address the key market drivers such as
increased energy efficiency, size reduction and noise reduction, through the
Integrated Clutch, Ferra Series and Calma Series

  ·
Significantly expand its distributor network, in particular in Europe

  ·
Explore new market opportunities, in particular for agricultural machinery

Concentric today holds a Capital Markets Day at Västra Trädgårdsgatan 15,
Stockholm. The event starts at CET 09.30 and concludes at CET 13.30.

For more information:
David Bessant, Chief Financial Officer, Concentric AB
E-mail: david.bessant @concentricab.com (lena.olofsdotter@concentricab.com)
Tel: +44 1214457783

Lena Olofsdotter, Corporate Communications, Concentric AB
E-mail: lena.olofsdotter@concentricab.com
Tel: +46 708-326 854