Hexagon’s take on 2020? Less confident than in February

Apr 1, 2020 | Hot Topics

Just yesterday I posted a quick note on Nemetshek’s muted optimism for 2020 and RIB’s lack thereof. Then, later in the day, Hexagon announced that it plans to delay a decision on paying a dividend, in an effort to keep cash on hand in case it’s needed. What does THAT mean?

Not all companies pay dividends, so you may not be familiar with the practice. Let’s start there.

When an investor buys a share, they are buying a piece of a company. The investor hopes the price of the share goes up (unless it’s some funky investment strategy that we’re not going to cover here); she’s compensated for her confidence in the company by making money at the time of sale. Until the sale, her cash is tied up, and she can’t get at it.

Dividends distribute the company’s profits to shareholders, typically when the company Board of Directors sets a dividend rate –as in, $1.00 per share– so the more shares one owns, the bigger the payment. It’s a way of proving to shareholders that the company is profitable and well-run and to compensate them for their loyalty.

Not all companies pay dividends. In our PLMish universe, it’s pretty rare. Companies that don’t pay dividends use the profits they could have returned to shareholders as retained earnings to invest in R&D, build out the sales teams or for some other reason that, everyone hopes, will increase the share price in the future. Shareholders in these companies make their money when they sell, and not before.

So what does it mean, that Hexagon has postponed a decision about paying out a dividend in 2020, for 2019?

Essentially, that Hexagon is recognizing the uncertainty that we are all trying to deal with right now. When the company reported results for 2019 back in February, I wrote

The second [investor question] was on the coronavirus and its effect on Hexagon’s business. Yes there are travel restrictions that create a more difficult trading environment, said [CEO Ola] Rollén, but it’s too early to tell how much of an impact there will be–he said that March is Hexagon’s most important month in China, and hopes the crisis will be over by then.

Now, the company hit pause on a dividend payout. Their announcement says that the Board still intends to pay the proposed dividend later in the year, presumably once the picture of cash inflows and outflows is clearer.

Hexagon is clearly not alone in trying to deal with uncertainty, and I would expect many companies to be having similar discussions about where to use cash and where to hold on to it. We’ve seen massive amounts of borrowing from airlines, hotel and restaurant chains, cruise ship companies, and others affected most directly by no-travel and shelter-in-place orders. I don’t expect that in the PLMish world, but caution seems like a very good idea until we all have a clearer path ahead.

Please check out the links I put up here and here to get involved in projects to build personal protective equipment, use data science to map the pandemic and find a vaccine, and more. Our skills can make a huge difference! And check out your software vendors’ websites; many are offering free or heavily discounted licenses to help you work from home, get more training or otherwise use this time to upskill.

I hope you’re well, washing those hands and know that this, too, shall pass.

And, with that, a tiny moment of zen:

I have cats. Now I just need a boatload of dominos and the patience to set this all up. Try to hang in there until 1:15, when the black and white one almost derails the whole thing.