The ongoing pandemic has changed the way people live, work, and socialize across the world. The COVID-19 outbreak has led to strict restrictions and closures in many countries, and the businesses had no choice but to ask their employees to work remotely. However, many companies seem to have realized the benefits of letting their employees work from home. This way, companies could cut real estate-related costs and better prepare themselves for a possible economic downturn.
In this article, we’ll take a look at how Savaria (TSX:SIS) — a Canadian accessibility equipment maker — is planning to benefit from an expected shift in the work culture. But first, that let’s learn a little more about the company’s business and dive into its recent financials.
Key factors about Savaria’s business
Savaria’s business is divided into three key segments — accessibility, patient handling, and adapted vehicles. In 2019, the company generated about $265.7 million, or nearly 71% of the total revenue, from the accessibility segment. The accessibility segment includes its home accessibility products, such as a straight stairlift, curved stairlift, vertical platform lift, inclined lift, and home elevator, among others.
Based on geography, nearly 81% of its 2019 revenue came from North America. Savaria primarily targets an aging population with its products. According to the U.S. Census Bureau’s and Stats Canada’s data, more than 20% of the North American population will be over the age of 65 by 2030.
In Q1 2020, Savaria’s revenue remained nearly flat, with a minor increase of about 1.1% YoY (year over year). Nonetheless, the company reported a solid 17.3% YoY rise in its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). Its EBITDA margin also rose by two percentage points in Q1 2020 to 14% from 12% a year ago.
“Stay at Home with Savaria” campaign
Interestingly, at a time when many companies are trying to cut their costs by laying off employees or reducing employees’ salaries and bonuses, Savaria is paying extra to employees. The company gave a $1,000 COVID-19 bonus each to all its 1,450 employees in the first quarter. It was done just to make sure their employees have some extra cash — if they need it — in case of any emergency.
To boost the sales of its home accessibility products, Savaria has started a campaign with a logo that says, “Stay at Home with Savaria.” The campaign is targeted to people who would spend more time at home as many companies allow their employees to continue working from home, even after the ongoing pandemic subsides.
Savaria seems to have already started getting some success with the campaign. In May, it signed sales contracts for home elevators with two major homebuilders in North America — with a combined value of about $3 million.
Savaria’s “Stay at Home with Savaria” campaign could be a reflection of its management’s proactive steps to benefit from a change in work culture in the post-pandemic world. I believe the demand for the company’s patient handling segment could also increase significantly, as countries across the world would want to be more prepared for any situation similar to COVID-19 and start spending more to improve their medical infrastructure.
We should note that Savaria’s profitability from its accessibility segment is much better as compared to its patient handling segment. These are the reasons why you may want to keep its stock in your portfolio for the long term.
As of June 12, Savaria stock has seen a 9% value erosion year to date as compared to a 10.6% drop in the S&P/TSX Composite Index.
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The Motley Fool recommends Savaria. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.