Interim report January – March 2019
Improved margin despite limited growth
First quarter 2019
· Revenue increased to MEUR 72.3 (71.6)
· Organic growth was -0.6% (2.7)
· The gross margin recovered versus the last quarter and was 41.0% (41.4)
· Adjusted EBITA amounted to MEUR 5.5 (5.1), corresponding to a margin of 7.6% (7.2)
· EBIT amounted to MEUR 3.9 (3.9), corresponding to a margin of 5.4% (5.5)
· Net profit for the period increased to MEUR 3.5 (2.3)
· Adjusted operating cash flow amounted to MEUR 0.6 (0.3)
· Tom Vorpahl took over from Charley Wallace as Executive Vice President North America and as a member of the Group management on 11 February 2019
· Pernilla Lindén joined the Group management team as the Executive Vice President Strategy and Business Excellence as of 1 January 2019
· Mattias Hakeröd joined the Group management team as the Executive Vice President Human Resources as of 7 January 2019
CEO’s comments
Revenue increased by 1.0% in reported currency, organic growth -0.6%, and the adjusted EBITA margin improved to 7.6% (7.2%). We posted a continued strong development in our stairlifts business, representing 50% of total revenue, with organic growth of 7.6%. Vehicle Accessibility revenue was essentially on par with the corresponding quarter last year, however with a positive trajectory as the supply of vehicles has stabilized. Developments in Patient Handling were mixed. The European business displayed sustained organic growth whereas the North American business struggled (-17.2%).
First quarter development
The organic growth was negative 0.6% (2.7%) in the first quarter, principally explained by the weak performance in Patient Handling North America. Accessibility revenue grew organically 5.7%. Within Accessibility, our Stairlifts business continued to outgrow the market and reported organic growth of 7.6%. Stairlifts North America had a soft start to the quarter, partly related to the ERP issues described in the year-end report, reducing its quarterly growth to 6.1%. However, the trajectory in the second half of the quarter was back to double digit growth. Patient Handling revenue decreased organically by 9.6%. Patient Handling Europe reported organic growth well above market growth. Revenue in Patient Handling North America decreased by 17.2% compared to the first quarter 2018, the strongest quarter in 2018, on the back of soft sales in the US Institutional segment.
Adjusted EBITA amounted to MEUR 5.5 (5.1) in the first quarter. The adjusted EBITA margin improved to 7.6% (7.2%) resulting from decreased operating expenses. Gross margin decreased slightly to 41.0% (41.4%). Gross margin was up 3.9 ppts on the fourth quarter 2018 as most of the items negatively impacting the fourth quarter margin were one-off in nature. Accessibility adjusted EBITA increased to MEUR 6.8 (5.6) driven by improved operating leverage. Gross margin was largely unchanged. Patient Handling adjusted EBITA decreased to MEUR 1.2 (1.8) and was attributable to a decreased gross margin and reduced cost absorption in the North American business. Puls reported adjusted EBITA of MEUR 0.4 (0.4).
Patient Handling North America
Revenue decreased by 17.2% primarily explained by US Institutional customers. This business is impacted by larger installation projects, which were relatively few in the quarter compared to the corresponding quarter last year. Revenue in the other segments in Patient Handling North America was broadly flat. In the first quarter we made some key changes to the North America organisation. These included (i) new management team, joined mid-February, (ii) separation of the US and Canadian commercial organisations and (iii) integration of North America into our global operations organisation. The new management team has continued to refine our commercial excellence and go-to-market approach as well as the order to cash processes. Key activities in the quarter included:
· Improved sales efficiency and monitoring: This includes call rate, number of customer visits, number of quotations and win-rate management.
· Reviewed sales force performance and geographical presence: As a result, three additional institutional sales representatives will be recruited in the second quarter. This investment will be funded from other parts of the organisation.
· Improved order to cash processes: This includes customer service response time, technical service first contact resolutions, delivery time, number of fulfilled shipments and cash collection.
· Improved value proposition: Focus on solution selling targeted at decreasing dependency on larger installation projects and increase recurring sales of high margin soft goods (e.g. slings).
· Strategic contracts: Increased focus on Hospital Integrated Delivery Networks and Veterans Association contracting to maximise sales under existing and new contracts.
I am confident that the new management team and their action plan will return the North American Patient Handling business to growth in the second half of 2019.
Staffan Ternström
President and CEO
Auditors’ review report
This report has not been reviewed by the company’s auditors
Telephone conference
A telephone conference, hosted by Staffan Ternström, President and CEO, and Stephan Révay, CFO, will be held at 10:00 a.m. CET on 25 April 2019. To participate, please register in advance using the following link http://emea.directeventreg.com/registration/8396346
A presentation will be available at www.handicaregroup.com/investors.
Dates for financial reports
Annual General Meeting 8 May 2019
Interim report April – June 2019 14 August 2019
Interim report July – September 2019 24 October 2019
Year-end report 2019 12 February 2020
For more information, contact:
Staffan Ternström, CEO, Tel: +46 725 490 029
Stephan Révay, CFO & IR, Tel: +46 729 666 532
This information is information that Handicare Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 8:00 a.m. CET on 25 April 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, vehicle adaptations and medical equipment. Handicare is a global company with sales in more than 20 countries and is a 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 March 2019, revenue amounted to MEUR 292 and the adjusted EBITA margin was 7.6%. Employees numbered around 1,200 and the share is listed on Nasdaq Stockholm. For more information, www.handicaregroup.com.