Year-end report 2018
Solid organic growth but lower margin for the fourth quarter 2018
Fourth quarter 2018
· Revenue increased to MEUR 73.9 (70.4)
· Organic growth was 3.8% (1.4)
· The gross margin was 37.1% (42.1)
· Adjusted EBITA amounted to MEUR 3.0 (6.2), corresponding to a margin of 4.1% (8.8)
· EBIT amounted to MEUR 0.4 (4.4), corresponding to a margin of 0.5% (6.3)
· Adjusted operating cash flow amounted to MEUR 9.3 (4.0)
· Gross profit lower for the fourth quarter of 2018, mainly due to inventory adjustments (MEUR 1.4), the implementation of a new ERP system in Vehicle Accessibility and North America (MEUR 0.8), and an unfavourable price and product mix (MEUR 1.2)
· Expenses relating to the reorganisation, primarily in North America, amounted to MEUR 1.0 for the quarter and were recognised under Other specified items
· After the end of the reporting period, Tom Vorpahl was appointed Executive Vice President for the business in North America
· Revenue increased to MEUR 290.9 (284.3)
· Organic growth was 3.7% (4.9)
· The gross margin was 41.2% (42.6)
· Adjusted EBITA amounted to MEUR 21.8 (26.2), corresponding to a margin of 7.5% (9.2)
· EBIT amounted to MEUR 13.2 (14.0), corresponding to a margin of 4.6% (4.9)
· Adjusted operating cash flow amounted to MEUR 18.4 (11.6)
· The net effect of postponed deliveries in Vehicle Accessibility is estimated at approximately MEUR -2.0 in terms of revenue and about MEUR -1.0 in terms of EBITA
· Expenses relating to reorganisations amounted to MEUR 3.0 for the full year, of which MEUR 2.0 was expensed in the second quarter and the remaining MEUR 1.0 in the fourth quarter
· Earnings per share before/after dilution amounted to EUR 0.19 (-0.08); the Board of Directors proposes a dividend of 5 cent (5 cent) per share for 2018***
· Staffan Ternström was appointed Group President and CEO in August
Solid organic growth but lower margins in 2018 with a mixed performance across our segments. Full year organic growth was 3.7% (4.9) and the adjusted EBITA margin decreased to 7.5% (9.2). We reported strong development in our stairlifts business, representing 50% of total revenue, with organic growth of 9%. We have gained market share in essentially all of our key markets. Developments in Patient Handling were mixed. The European business reported sustained organic growth whereas the North American business struggled. In Vehicle Accessibility we were impacted by the general turmoil in the European car industry, related to the new emission testing regulation, which lead to delayed delivery of vehicles.
Since joining Handicare in August, I have met many customers, employees and suppliers. I have spent significant time together with our sales force in all of our key markets. Moreover, with support from my management team, I have also performed a business review during the fourth quarter. Altogether this has given me a thorough understanding of the most notable opportunities and challenges at Handicare. I am pleased to note that the company has good products and solutions and that it is comprised of committed and engaged employees. Furthermore, we hold strong positions in many markets, of which several have a good growth. However, we need to further refine our go-to-market approach and organisation, most notably in North America. With these changes I am confident that we will be well positioned to capitalize on the underlying market growth and I am excited about the company’s future prospects.
Revenue grew organically by 3.8% (1.4) in the fourth quarter on the back of solid growth in both Accessibility, 4.5%, and Patient Handling, 4.4%. Within Accessibility, our Stairlifts business continued to outgrow the market and reported organic growth of 6%. The strong trajectory in Stairlifts North America was maintained with organic growth of 16% in the quarter. Patient Handling posted organic growth in both Europe and North America. A trend shift was noted in the North America business which reported organic growth of 4.9%, albeit from a low base. Adjusted EBITA amounted to MEUR 3.0 (6.2) in the fourth quarter. The lower profit was primarily a result of inventory adjustments and issues related to the implementation of a new ERP-system. In addition, we experienced a decrease in average selling prices and an unfavourable product mix. The former as result of new product launches and year-end price campaigns targeted at increasing market share in specific geographies and segments.
New Executive Vice President of North America on-board and a number of initiatives implemented to improve profitability
Handicare is driving a number of initiatives to return to profitable growth. One of these initiatives is to optimise the organisation. As a result, Tom Vorpahl will replace Charley Wallace as the Executive Vice President North America on 11 February. Tom Vorpahl has extensive experience from the medical device industry and most recently he was Vice President at Mitchell Planning Associates, the largest hospital equipment planning and procurement firm in the US. Furthermore, we will take the final step in integrating the North American Patient Handling business into our global operations and quality organisations. This will further improve our quality processes and increase efficiency. Finally, we have divided the US and Canadian business into two separate commercial organisations to better capitalise on market specific opportunities.
We continue to invest in our North American sales force and HUB strategy. Key investments in the fourth quarter included one new dealer development director, six new sales and technical service representatives and the opening of one new HUB. We are also in the process of fine tuning our HUB strategy, for example the number of full-service HUBs (including inventory and customer service) versus pure sales offices.
Key priorities for 2019
The financial development in the fourth quarter of 2018 is not impacting our outlook for 2019. The key priorities for 2019 are to deliver solid organic growth and improved margins. These will be supported by updates to our go-to-market approach. Key changes include price tiering and refining dealer management programs to increase dealer share of wallet and reduce dealer churn. We will also optimise performance management of our people and businesses. Evaluating new markets and acquisition targets continues to be an important part of our strategy.
President and CEO
Auditors’ review report
This year-end report has not been reviewed by the company’s auditors.
A telephone conference, hosted by Staffan Ternström, President and CEO, and Stephan Révay, CFO, will be held at 10:00 a.m. CET on 6 February 2019. To participate, please register in advance using the following link http://emea.directeventreg.com/registration/3359669
A presentation will be available at www.handicaregroup.com/investors.
Dates for financial reports
Interim report January – March 2019 25 April 2019
Annual Report week 13 2019
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 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 6 February 2019.
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.
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 is located at six sites distributed across North America, Asia and Europe. In the full year 2018, revenue amounted to MEUR 291 and the adjusted EBITA margin was 7.5%. Employees numbered around 1,200 and the share is listed on Nasdaq Stockholm. For more information, www.handicaregroup.com.