Interim report January – September 2019
Continued positive growth in Accessibility. Patient Handling Institutional US and Brexit uncertainties impact revenues. The Board has initiated a strategic review aimed to uncover underlying value
Third quarter 2019
· Revenue amounted to MEUR 65.6 (65.2)
· Organic growth was 0.2% (0.4)
· The gross margin was 41.2% (44.0)
· Adjusted EBITA amounted to MEUR 4.7 (5.9), corresponding to a margin of 7.2% (9.1)
· EBIT amounted to MEUR 3.2 (4.5), corresponding to a margin of 4.9% (6.9)
· Net profit (including discontinued operations) amounted to MEUR 3.9 (3.5)
· Earnings per share (including discontinued operations) before and after dilution amounted to EUR 0.07 (0.06)
· Adjusted operating cash flow amounted to MEUR 6.9 (0.8)
· Pernilla Lindén was appointed CFO effective 14 August
· Erik Østby was appointed Executive Vice President Patient Handling Europe effective 12 August
Changed outlook 2019:
· Expected organic growth in the second half-year will be lower than 4-6%. For more information, see CEO’s Comments on page 2
January-September 2019
· Revenue amounted to MEUR 202.2 (200.5)
· Organic growth was -0.3% (2.8)
· The gross margin was 41.8% (43.5)
· Adjusted EBITA amounted to MEUR 16.2 (17.8), corresponding to a margin of 8.0% (8.9)
· EBIT amounted to MEUR 11.7 (11.8), corresponding to a margin of 5.8% (5.9)
· Net profit (including discontinued operations) amounted to MEUR 13.9 (10.5)
· Earnings per share (including discontinued operations) before and after dilution amounted to EUR 0.24 (0.18)
· Adjusted operating cash flow amounted to MEUR 7.8 (8.1)
· The Puls business unit was divested. The purchase price amounted to MEUR 10.9
Significant events after the end of the period:
· In order to expose Handicare’s underlying value, the Board has decided to initiate a strategic review that may include the divestment of one or more business units, Handicare is acquired, or other strategic transactions. The strategic review may also result in Handicare remaining in its current structure. In order to support the Board in this process, Rothschild has been appointed as financial advisors
CEO’s Comments
Continued positive growth in Accessibility. Patient Handling Institutional US and Brexit uncertainties impact revenues. The Board has initiated a strategic review aimed to uncover underlying value
Our efforts to increase focus on quality and customer experience continued in the quarter. A recent customer survey confirmed Handicare’s leading position in Accessibility and Patient Handling. We have an attractive product offering, a strong geographical presence and a good value proposition. The survey also pinpointed some areas of improvement, which are already addressed in our program aimed at further improving the customer experience, service quality and the offering.
The improvement measures have been successful and we’re now seeing solid organic revenue growth on several of our major markets. The launch of the new 1100 stairlift was very successful with consistent high order intake on most of our markets. The exceptions in an otherwise solid quarter were the UK, where Brexit concerns led to lower revenue, and Patient Handling in the US, where revenues were down year-on-year despite a number of actions initiated.
At Group level, negative factors offset some positive progress, and Group revenue totaled 65.6 MEUR (65.2) in the third quarter. Operating profit measured as adjusted EBITA was 4.7 MEUR (5.9), corresponding to a margin of 7.2% (9.1). Profits were negatively impacted by decreased revenue and a lower gross margin, and positively impacted by lower costs. Gross margin fell compared to a strong Q3 in the previous year. The decrease was mainly due to a changed country mix and weak revenues that reduced cost absorption.
Progress by business unit
Quarterly revenue in the Accessibility business unit totaled 48.0 MEUR (46.6), an increase of 3.1%. The stairlift business delivered organic growth of 3.7%, slightly below our expectations. The lower growth was mainly due to a weaker market in the UK. We consider the market downturn is due to Brexit, which is generating temporary uncertainties at consumer level. Very strong growth continued on other major markets such as Germany, the Netherlands and Italy. The strategically important North American market made solid progress and grew organically by 9% in the quarter. Overall, we foresee continued long-term profitability and growth potential for the stairlift business. Vehicle Accessibility developed according to plan and delivered organic growth in the quarter.
Sales in the Patient Handling business unit totaled 17.6 MEUR (18.6). Canada progressed as expected, while the effects from the improvement initiatives in the US are taking longer than anticipated. We expected the reorganization and improved sales processes to take effect in the third quarter. It takes time for all the measures to feed through and to achieve the full effect of new sales staff focusing on institutional customers with longer sales cycles. We continue to drive sales effectiveness, a stronger geographical presence and an improved product, service and delivery offering. Progress is moving in the right direction, and all installation engineers in Patient Handling in the US are fully booked in the fourth quarter. We expect our initiatives to yield results during the first half of 2020.
New product launches and innovation
After the summer, I’ve had the opportunity to visit most of our key markets in Europe and attended the launch of our new 1100 stairlift in the US. We received very positive feedback on the launch; a clear confirmation of the strength of the Handicare brand, and that our investments in innovation and product development are providing return on investment. The reception has been very positive across the board and has led to several new customers and increased share-of-wallet from existing customers. It is my ambition to continue the customer-oriented innovation and strengthen Handicare as a supplier of premium products to further improve our position as the market leader in stairlifts.
Changed outlook 2019
Based on lower revenue than anticipated in the third quarter, we expect organic growth in the second half-year of 2019 to be lower than previously communicated forecast of 4 – 6%. We retain the outlook for an improved adjusted EBITA margin in the second half of the year compared to the first half (8.4%).
The Board has decided to review a range of strategic options
We’re a leading player on attractive markets with demographically driven growth. The extensive and important improvement measures that have been implemented over the past 12 months have not yet fed through to improved results. However, I’m convinced that we’re on the right track and that we’ve built a solid foundation for profitable growth in line with our financial targets. I look forward to uncover Handicare’s full potential through the strategic review process.
Staffan Ternström
President and CEO
Auditors’ review report
To the Board of Directors of Handicare Group AB (publ), corporate identity number 556982–7115
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 24 October 2019. To participate, please register in advance using the following link http://emea.directeventreg.com/registration/4999302
A presentation will be available at www.handicaregroup.com/investors.
Dates for financial reports and Annual General Meeting
Year-end report 2019 12 February 2020
Interim report January – March 2020 23 April 2020
The Annual General Meeting will be held in Stockholm 6 May 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. The information was submitted for publication, through the agency of the contact persons set out above, at 8:00 a.m. CET on 24 October 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 September 2019, revenue amounted to MEUR 271 and the adjusted EBITA margin was 7.0%. Employees numbered around 1,100 and the share is listed on Nasdaq Stockholm. For more information, www.handicaregroup.com.