VBG Group acquires and develops industrial companies with strong brands and good growth potential. It aims to have growth of 10% p.a. over five years, of which 5% organic and 5% acquired, with an op margin of 12%+. It offers friction springs for aircraft and buildings (45% market share), drawbar couplings for trucks with heavy trailers (55%), sliding roofs for tarpaulin-covered trailers, tipper vehicles and railway cars (40%), automatic tyre chains (65%) and climate control systems for buses, off-road, utility and defence vehicles (40%). It has 4 divisions: Truck Equipment, Edscha Trailer Systems, Mobile Climate Control and Ringfeder Power Transmission.
VBG’s strong market positions allows for pricing power and an ability to maintain, or even increase, profitability. Its historical ability to obtain high free cash flows (conversion historically above net profit) could allow for future profitable investments and M&A opportunities while its end-markets, such as climate control products for North American buses, could provide a strong growth profile for VBG.
The company is heavily exposed to the automotive industry, both through trucks, trailers and other commercial passenger vehicles. These markets are historically cyclical and both the European and North American truck markets have been strong in recent years. The large acquisition of MCC from Ratos in 2016 could still prove to be worse than expected in terms of revenue and/or profitability potential.