Interim report January – June 2019
Solid growth in Stairlifts and continued focus on Patient Handling. Positive outlook for second half of 2019
Second quarter 2019
· Revenue decreased to MEUR 69.4 (70.0)
· Organic growth was -1.8% (7.2)
· The gross margin was 42.3% (44.0)
· Adjusted EBITA amounted to MEUR 6.5 (7.2), corresponding to a margin of 9.3% (10.2)
· EBIT increased to MEUR 4.9 (3.8), corresponding to a margin of 7.1% (5.4)
· Net profit (total) increased to MEUR 6.4 (4.8)
· Adjusted operating cash flow amounted to MEUR 0.7 (7.4)
· The Puls business unit was divested. The purchase price amounted to MEUR 10.9
· Pernilla Lindén was appointed as CFO and will take up her position on 14 August 2019
· Erik Østby was appointed as the new Executive Vice President Patient Handling Europe and will take up his position on 12 August 2019
First six months 2019
· Revenue increased to MEUR 136.6 (135.3)
· Organic growth was -0.5% (4.0)
· The gross margin was 42.0% (43.3)
· Adjusted EBITA amounted to MEUR 11.5 (11.9), corresponding to a margin of 8.4% (8.8)
· EBIT amounted to MEUR 8.5 (7.3), corresponding to a margin of 6.2% (5.4)
· Net profit (total) increased to MEUR 9.9 (7.0)
· Adjusted operating cash flow amounted to MEUR 0.9 (7.2)
CEO’s comments
This was a quarter with mixed development. We reported continued solid sales growth in Stairlifts, now representing 55% of total sales, organic growth reached 4.6%. The trend in Patient Handling North America slowly began to move in the right direction. In line with expectations, organic growth amounted to 4.8% compared with the first quarter of 2019. In line with our strategy, we focused our operations through the divestment of Puls. The development in Vehicle Accessibility and Patient Handling were challenging and this was a contributing factor in the decrease in total revenue of -0.8% in reported currency compared with last year.
Second quarter development
Revenue decreased organically by -1.8% (7.2) in the second quarter, primarily due to the weak development in Patient Handling. Revenue in Accessibility grew organically by 1.1%. In Accessibility, Stairlifts continued to grow faster than the market, with organic growth of 4.6%. Stairlifts North America reported organic growth of 5.6% compared with the same quarter last year, which was the strongest quarter in 2018. In addition, it was positive to see that our new 1100 stairlift received a warm welcome upon its launch in the strategic UK market. Vehicle Accessibility reported negative organic growth as a result of a softer market in Denmark. Patient Handling reported negative organic growth of -8.6%. Revenue in Patient Handling North America decreased -9.2%, driven primarily by lower sales to institutional customers in the US. The Patient Handling European operations were negatively impacted by stock-up of inventory at certain larger distributors in the first quarter.
Adjusted EBITA totalled MEUR 6.5 (7.2) in the second quarter. The adjusted EBITA margin declined to 9.3% (10.2) as a result of a lower gross margin. The gross margin decreased to 42.3% (44.0), driven by product mix. Operating expenses decreased, both in nominal terms and in relation to revenue, which is driven by lower personnel expenses for administrative staff — an effect of the headcount reduction program implemented in the second quarter of 2018.
Patient Handling North America
The new management team, which was appointed in the first quarter, has continued the work on refining our Commercial Excellence strategy and our Go To Market strategy as well as on improving our order-to-cash process. In the second quarter, this meant that:
· We improved efficiency and tracking of the sales process. This resulted in increased sales compared with the first quarter of 2019.
· We evaluated the performance and geographic presence of the sales force in the US. One result was that approximately 30% of the institutional sales team in the US was replaced at the end of the second quarter. Additionally, we began the recruitment process for a new VP of institutional sales in the US, and for a newly established corporate accounts role.
· Two key individuals (a customer service director and a logistics director) were recruited to strengthen our order-to-cash process.
During the quarter, I devoted a great deal of time to the North American business. I see improvements in several areas, but challenges remain. Altogether, this means there is a risk that our previously communicated goal of a return to organic growth during the second half of 2019 will be postponed 1-2 quarters.
Divestment of Puls
During the quarter, Puls was sold to Mediq International BV. This marked an important step in the strategy of focusing on Handicare’s core operations. The sale creates additional space for growth (both organically and through acquisitions) and for the expansion of Handicare’s core operations. The purchase price amounted to MNOK 106 (MEUR 10.9).
Positive outlook for second half of 2019
Results during the first half of 2019 were unsatisfactory, with organic growth of -0.5% and an adjusted EBITA margin of 8.4%. The outlook for the second half of 2019 is better for several of our businesses and we will also continue the execution on the turn-around plan in North America. Taking this into account, we expect that organic revenue growth for the second half of 2019 will fall into our growth target, which is 4% to 6% in the medium-term. The adjusted EBITA margin is expected to increase during the second half of 2019 compared with the first half of 2019 (8.4%).
Staffan Ternström
President and CEO
Audit review
This interim report has not been reviewed by the company’s auditors.
Telephone conference
A telephone conference, hosted by Staffan Ternström, President and CEO, and Pernilla Lindén, CFO, will be held at 10:00 a.m. CET on 14 August 2019. To participate, please register in advance using the following link http://emea.directeventreg.com/registration/2081967 (http://emea.directeventreg.com/registration/3359669)
A presentation will be available at www.handicaregroup.com/investors.
Dates for financial reports
Interim report January – September 2019 24 October 2019
Year-end report 2019 12 February 2020
For more information, contact:
Staffan Ternström, CEO, Tel: +46 725 490 029
Pernilla Lindén, CFO & IR, Tel: +46 708 775 832
This information is information that Handicare Group AB (publ) is required to disclose pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication, through the agency of the contact persons set out above, at 8:00 a.m. CET on 14 August 2019.
Forward-looking statements
To the extent this report contains forward-looking statements, these statements are based on the current expectations of Handicare’s Group management. Although management considers the expectations expressed in such forward-looking statements to be reasonable, there is no guarantee that these expectations will prove correct. Accordingly, actual future outcomes may differ significantly from those expressed in the forward-looking statements due to such factors as changed economic, market and competitive conditions, changes in regulatory requirements and other policy measures, and fluctuations in exchange rates.
About Handicare
Handicare offers solutions to increase the independence of disabled or elderly people, and to facilitate for their care providers and family. The offering encompasses a comprehensive range of curved and straight stairlifts, transfer, lifting and repositioning aids and vehicle adaptations. Handicare is a global company with sales in more than 20 countries and is one of the market leader in this field. The head office is in Stockholm, Sweden and manufacturing and assembly is located at five sites distributed across North America, Asia and Europe. In the twelve-month period to June 2019, revenue amounted to MEUR 271 and the adjusted EBITA margin was 7.5%. Employees numbered around 1,100 and the share is listed on Nasdaq Stockholm. For more information, www.handicaregroup.com.