Q1 2020 Presentation 23 April 2020 Johan Ek, President and CEO - - PowerPoint PPT Presentation

Q1 2020 Presentation

23 April 2020 Johan Ek, President and CEO Pernilla Lindén, CFO

• Revenues decreased organically in the quarter, primarily due to the negative impact of

Covid-19

• Slight increase in Accessibility
• Double-digit growth for Stairlifts North America
• Stairlifts Europe impacted by Covid-19
• Decline in revenue for Patient Handling
• US sales still challenging
• Strong growth for EU/ROW
• Adjusted EBITA margin declined vs last year due to the weak performance in North America
• Goodwill impairment of MEUR 25 relating to the Patient Handling operations in North

America

• Strong operating cash conversion in the quarter and a leverage of 2.4x (excluding IFRS 16)
• Strategic review concluded
• Successful divestments of Puls, Vehicle Accessibility Denmark and Patient Handling

Europe/ROW

• New segment reporting 2020

Summary Q1 2020

2

• Furlough and short-term layoffs
• Stairlifts: Furlough in UK and NL
• Vehicle Accessibility: Furlough initiated in Norway
• Patient Handling North America: US short-term layoffs. Furlough in Canada
• Innovative sales approaches
• E.g. digital sales
• External spend reduction
• General spend and investment freeze of non-critical items/investments

Focused measures to reduce Covid-19 impact

3

LTM Full year MEUR 2020 2019 ∆% 2019/20 2019 Revenue 61.0 67.2 -9.3 % 264.8 271.0 Organic revenue growth

• 2.0 %

Gross margin 42.9 % 41.7 % 41.7 % 41.5 % Adjusted EBITA 3.8 5.2 -27.8 % 20.1 21.5 Adjusted EBITA margin 6.2 % 7.7 % 7.6 % 7.9 %

• Adj. EBITA (ex. Veh Acc DK)

3.8 5.0 -25.6 % 20.1 21.3 Adjusted EBITA margin (ex. Veh Acc DK) 6.2 % 8.1 % 8.0 % 8.4 % January - March

Financial highlights – Group

4

Revenue Q1: organic growth -2.0%

• Accessibility +0.1%
• Patient Handling -7.2%
• Vehicle Accessibility +2.8%
• Covid-19 impact from Mid-March

EBITA Q1: adjusted margin 6.2% (7.7%)

• Gross margin increased to 42.9% (41.7%) mainly as a result of no trading impact from the low margin in Vehicle Acc. Denmark in Q1-20.
• Operating expenses (excluding Vehicle Accessibility Denmark) were higher than LY.
• Group costs (excluding depreciation and Vehicle Accessibility Denmark) 2.7 MEUR (2.8 MEUR).

OCF Q1: 6.4 MEUR (1.6)

• Cash flow from working capital +1.5 MEUR (-4.8 MEUR).
• Leverage 2.4x (excluding IFRS 16).

Goodwill write off Patient Handling North America

• Recognized a goodwill impairment of MEUR 25 relating to the Patient Handling operations in North America, as a result of updated

impairment testing that includes a delayed returned to improved profitability.

Adjusted EBITA bridge

Note: All P&L numbers in this report exclude the divested business area Puls. No change to the balance sheet Note: Numbers include Vehicle Accessibility Denmark for the period prior the divestment December 2019 Note: Organic revenue growth exclude Vehicle Accessibility Denmark

5.2 Q1-19 Q1-20 3.8

0.2

Opex Margin

0.7

Depreciation

• 2.6

0.3

Sales

LTM Full year MEUR 2020 2019 ∆% 2019/20 2019 Revenue 39.0 38.7 0.8 % 157.6 157.3 Organic revenue growth 0.1 % Adjusted EBITA 6.1 6.3 -2.9 % 24.6 24.8 Adjusted EBITA margin 15.7 % 16.2 % 15.6 % 15.8 % January - March

Accessibility

5

Revenue Q1: organic growth 0.1%

• Strong growth in North America (21.6%), and in Europe we saw strong growth in Netherlands and

France.

• Countries like UK, Spain and Italy were struggling due to Covid-19.

EBITA Q1: adjusted margin 15.7% (16.2)

• Adjusted EBITA margin decreased slightly due to higher personnel related costs. Gross margin was up

during the period.

Revenue and Q-on-Q organic growth (%)* – Stairlifts NA

*e.g. Q1 2020 vs Q1 2019

Q-on-Q %*

Q2-18 Q3-18

Revenue (MEUR)

Q2-19 Q4-18 Q1-19 Q4-19 Q3-19 Q1-20 47% 15% 16% 6% 6% 9% 24% 22%

LTM Full year MEUR 2020 2019 ∆% 2019/20 2019 Revenue 17.8 19.0 -6.4 % 74.6 75.8 Organic revenue growth

• 7.2 %

Adjusted EBITA 0.2 1.2 -85.7 % 4.9 5.9 Adjusted EBITA margin 1.0 % 6.5 % 6.5 % 7.8 % Adj EBITA (excl PH EU)

• 1.3
• 0.1

0.0 1.2 Adjusted EBITA margin (excl. PH EU)

• 12.6 %
• 0.9 %

0.1 % 2.5 % January - March

Patient Handling

6

• Agreement signed to divest Patient Handling Europe, including all Patient Handling operations outside

North America. The transaction is expected to close in May. For Q1, PH EU is included in the continuing operations. Revenue Q1: organic decline -7.2%

• Continue to struggle in North America, down with 16.7% partly due to weak performance and partly

due to negative Covid-19 impact.

• The organic growth in Europe was strong and revenue rose by 9.9% partly due to positive impact from

Covid-19. EBITA Q1: adjusted margin 1.0% (6.5%)

• Operating expenses was flat in the period, but declining revenue putting pressure on the operational

cost base.

LTM Full year MEUR 2020 2019 ∆% 2019/20 2019 Revenue 4.1 4.3 -5.2 % 19.7 19.9 Organic revenue growth 2.8 % Adjusted EBITA 0.3 0.4 -32.4 % 1.4 1.6 Adjusted EBITA margin 6.2 % 8.7 % 7.3 % 7.8 % January - March

Vehicle Accessibility

7

Revenue Q1: organic growth +2.8%

• Organic growth driven by slightly higher ambulance conversion compared to last year.

EBITA Q1: adjusted margin 6.2% (8.7)

• Adjusted EBITDA margin was down primarily driven by a gross margin decrease as the operating

expenses were unchanged in absolute terms and in relation to revenue. Gross margin was down due to a weakening NOK against EUR.

The Lift Up Program

• Handicare has not performed as expected
• Good growth and solid profitability in Accessibility Stairlifts
• Poor performance in smaller businesses
• Strategic review offers a new start, creating a more focused company
• Successful divestments of Patient Handling Europe, Vehicle Accessibility Denmark & Puls
• Opportunity to optimize organization and make it more focused
• Stronger balance sheet to support growth agenda, both organic and inorganic (M&A)
• Accessibility now accounts for more than 90% of the EBITA of the group
• Strong market positions in key European markets
• Good growth opportunity in the US
• 6% organic CAGR for the last eight years in Accessibility Stairlifts
• Patient Handling North America – Increasing profit is key focus
• Solid underlying market and position
• Bring back to profit

Handicare – becoming a more focused company

9

Implementing “The Lift Up Program” – a three-phase plan

The Lift Up Program

Build a focused Accessibility company poised for growth

Profitability Growth Focus & Simplify

Why Accessibility – market trends and growth drivers

11

• Demographic development
• Expected increasing share of elderly people and a longer life

expectancy

• Increase in number of people living longer with chronic diseases
• Preference among the elderly to stay at home and maintain

independence

• Focus on cost containment and efficiency, e.g. through:
• Continuing global pressure on public spending healthcare budgets
• Critical need products which save public money, providing

incentives for healthcare systems to move patients to homecare settings

• Keep people in their homes for a longer period of time
• Preferences among end-users
• Improving welfare in core markets
• Expanding access to public funding given cost saving potential (e.g.

government grants for stairlifts)

Attractive market within Stairlifts

12 Market size1 Market size

€250m

Only includes markets where Handicare is currently present – clear opportunity to expand both geographically as well as to product adjacencies

Europe North America Market growth Market growth

~2-4% ~3-5%

Sales LTM Mar-20 Sales LTM Mar-20

86% 13% €480m

Geographic expansion plan

• Strong growth in existing markets
• Opportunity to materially expand addressable

market by entering new geographies and adjacent categories

• Further broadening of the product offering

Notes 1 Includes UK, Netherlands, Germany, France and Italy

• Establish a more focused and agile organization
• Create a Group that reflects our focus on Stairlifts
• Optimize processes and avoid duplication of efforts
• Simplify structures and streamline cost base – best fit for purpose
• Increase profitability, strengthen margins and drive for growth
• Improve margins by better procurement processes and

pricing mechanisms

• Expand market presence
• Strengthen product portfolio
• Drive focused M&A agenda
• Patient Handling North America under review
• Take actions to ensure profitable growth
• Assessment of options to follow
• Ongoing updates, next one on June 12th

The Lift Up Program in summary

13

Build a focused Accessibility company poised for growth

Q&A

Forward-looking statements

15

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.

Appendices

17 *The pay-out decision will be based on Handicare’s financial position, investment needs, acquisition opportunities and liquidity position.

An annual dividend corresponding to 30-50 percent of the net profit for the period* An average annual growth of 10 percent, of which 4-6 percent

• rganically, in the medium-term

Leverage of approximately 2.5 times net debt/LTM (last 12 months) adjusted EBITDA (excl IFRS16), with flexibility for strategic activities* An adjusted EBITA margin exceeding 12 percent in the medium-term

FINANCIAL TARGETS

LTM 2020 organic:

• 0.1%

LTM 2020: 7.6% 31 March 2020: 2.4x

Dividend 2019: postponed dividend proposal for 2019

Q1 revenue and adjusted EBITA bridges

18

1.2ppts

• 2.7ppt
• 0.1ppt

Q1 Adjusted EBITA bridge by SBU Q1 Adjusted EBITA bridge by component Q1 Revenue bridge by SBU

MEUR MEUR Opex

• 2.6

0.2

Q1-19

0.7

Margin Q1-20 3.8 Sales

0.3

5.2 Depreciation

• 2.0%

Q1-20 organic

0.1

• 1.4

FX 61.0

0.1

• Veh. Acc

0.0

Q1-19 FX Adj 62.2 PH

• Veh. Acc.

DK Q1-19

0.0

Q1-19 67.2 Other Acc

• 5.1

7.7% 6.2% Margin Q1-20 Q1-19

• 1.1

Acc

• Veh. Acc

Other

• 0.1

3.8 PH 5.2

• 0.1
• 0.2
• 3%

Growth

• 86%

n/a

• 28%
• 32%

Cash flow

19 Full year MEUR 2020 2019 2019 Adjusted EBITDA

5.8 7.4 30.3

Inventory

• 3.3
• 2.1

0.5

Accounts receivable

4.5 0.4

• 0.2

Accounts payable

2.3 0.5

• 4.4

Other receivables/liabilities

• 2.0
• 3.6
• 1.7

Change in NWC

1.5

• 4.8
• 5.8

Tangible assets

• 0.2
• 0.4
• 2.1

Intangible assets

• 0.6
• 0.5
• 2.9

Total capex

• 0.9
• 1.0
• 5.0

Adjusted operating cash flow

6.4 1.6 19.5

KPI:s Paid tax

• 0.1
• 0.1
• 0.3

Adjusted OCF / Adjusted EBITDA 111% 22% 64% Net debt (excl IFRS 16) 53.9 83.0 62.5 Net debt / Adjusted LTM EBITDA (excl IFRS 16) 2.4 3.4 2.6 January - March

Adjusted OCF: 6.4 MEUR (1.6)

• Other specified items paid in Q1-20: 0.5 MEUR
• Increased operating cash flow due to focus on optimizing net working capital
• Q1-20 capex of 0.9 MEUR (1.5% of revenue)

Net debt / adjusted EBITDA 2.4x (excl IFRS 16)

• Strong cash flow position, cash balance end of the period 38.8 (23.9), in addition

the RCF of 40 mEUR is undrawn at quarter end

• Dividend for 2019 of 4.1 mEUR postponed following the uncertainties of Covid-19
• Unpaid other specified items: 3.2 MEUR at 31 Mar 2020

Group* 31 Mar 31 Mar 31 Dec MEUR 2020 2019 2019 Goodwill 130.8 166.1 159.3 Other intangible assets 43.5 48.8 46.3 Property, plant and equipment 7.4 9.3 7.9 Right-of-use assets 20.3 26.9 22.5 Deferred tax assets 3.1 7.7 3.2 Other non-current assets 0.1 0.2 0.1 Total non-current assets 205.3 259.1 239.2 Inventory 30.4 38.5 27.7 Accounts receivable 35.0 44.0 40.4 Tax receivables 0.2 0.2 0.3 Other current assets 3.6 4.0 2.8 Cash and cash equivalents 38.8 23.9 33.8 Total current assets 108.1 110.6 105.0 Total assets 313.4 369.7 344.2 Total equity 144.2 176.7 173.4 Provisions for pensions 0.5 0.2 0.6 Deferred tax liabilities 7.6 7.7 6.0 Advance payments 2.4 2.4 2.4 Other liabilities 0.9 0.3 0.8 Lease liabilities 16.4 21.8 18.2 Interest-bearing loans 91.7 105.9 95.1 Total long-term liabilities 119.6 138.4 123.1 Interest-bearing loans

• 0.0
• Lease liabilities

4.2 4.8 4.4 Accounts payable 25.4 31.9 23.1 Other current liabilities and provisions 20.1 17.8 20.2 Total current liabilities 49.6 54.6 47.7 Total shareholders' equity and liabilities 313.4 369.7 344.2

Balance Sheet

20

Divestment of PH EU/ROW

21

Patient Handling EU/ROW

Q1 Q2 Q3 Q4 Full year Q1

MEUR

2019 2019 2019 2019

2019

2020

Revenue 6.9 6.5 5.9 6.9 26.1 7.5 Adjusted EBITA (incl IFRS16) 1.3 1.2 1.0 1.2 4.7 1.5 Adjusted EBITA margin 19.4 % 18.9 % 16.2 % 17.3 % 18.0 % 19.7 % Background:

• In 2019, PH EU accounted for 11% of Group sales
• An important step in focusing Handicare on its core businesses
• The divestment creates additional capacity for growth (both organic and

through M&A) and expansion of the core businesses of Handicare

• Divested to Direct Healthcare Group
• Signed 9 April, closing expected early May 2020 after finalised carve-out

Financial impact:

• Enterprise Value: 29.7 MEUR
• Pre-tax capital loss of approx. 12 MEUR, before transaction costs. Will

be reported in the Q2 report and from Q2 and onwards PH EU will be reported as discontinued business

• EV / adjusted EBITDA: approx. 8x