Q2 2019 Presentation 14 August 2019 Staffan Ternstrm, President - - PowerPoint PPT Presentation

Q2 2019 Presentation

14 August 2019 Staffan Ternström, President and CEO Pernilla Lindén, CFO

Summary Q2 2019

• Continued good growth and stable margins in Stairlifts
• Lower revenue in Vehicle Accessibility and decreased

margins

• Lower revenue in PH NA and PH EU
• US institutional sales still challenging
• Sequential growth for PH NA vs Q1
• PH EU impacted by stock-up at key distributors in Q1-19
• Successful divestment of the non-core business area Puls.

Total consideration 10.9 MEUR and EV / adjusted EBITA 7.6x

• Gross margin lower than last year impacted by product
• mix. However improved margin vs Q1-19
• Adjusted EBITA margin decreased vs last year, but

improved vs Q1-19

• Operating cash flow impacted by reduced inventory and

timing of payments of accounts payable

• Successful launch of 1100 on the important UK market
• Pernilla Lindén new CFO

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LTM Full year MEUR 2019 2018 ∆% 2019 2018 ∆% 2018/2019 2018 Revenue 69.4 70.0 -0.8 % 136.6 135.3 0.9 % 271.0 269.8 Organic revenue growth

• 1.8 %
• 0.5 %

Gross margin 42.3 % 44.0 % 42.0 % 43.3 % 41.3 % 42.0 % Adjusted EBITA 6.5 7.2 -9.8 % 11.5 11.9 -2.9 % 20.3 20.7 Adjusted EBITA margin 9.3 % 10.2 % 8.4 % 8.8 % 7.5 % 7.7 % April - June January - June

Financial highlights – Group

Revenue Q2: organic growth -1.8%

• Accessibility +1.1%
• Patient Handling -8.6%

EBITA Q2: adjusted margin 9.3% (10.2%)

• Gross margin decreased to 42.3% (44.0%) driven by product mix. Gross margin was up 0.6 ppts on Q1-

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• Operating expenses decreased by 0.7 MEUR, primarily explained by decreased personnel costs
• Group costs 2.9 MEUR (3.0 MEUR)

OCF Q2: 0.7 MEUR (7.4)

• Other specified items -0.5 MEUR (mainly severance costs related to former NA management)
• Cash flow from working capital -5.5 MEUR (0.7 MEUR). Reduced inventory levels and timing of

payments of accounts payable

• Leverage 3.2x (excluding IFRS 16)

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Adjusted EBITA bridge Margin 6.5 Q2-19 Sales Q2-18

0.7

• 1.2

Opex

0.1

Depreciation 7.2

• 0.2

Note: From 1 January 2019, the Group applies IFRS 16 Leases. To facilitate comparison between the periods, the performance measures in this presentation are presented excluding the impact from IFRS 16. The transition impacts are set out in Appendix.

MEUR

Note: All P&L numbers in this report exclude the divested business area Puls. No change to the balance sheet.

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

Accessibility

Revenue Q2: organic growth +1.1%

• Stairlifts +4.6% (NA +5.6%)
• NA growth compared to the strongest quarter in 2018
• Decreased revenue in Vehicle Accessibility due to soft market in Denmark. Moderate growth

reported in Norway EBITA Q2: adjusted margin 14.2% (15.0)

• Decline in gross margin from product mix in both Stairlifts and Vehicle Accessibility
• Operating expenses were principally flat

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*e.g. Q2 2019 vs Q2 2018

Q-on-Q %*

Q4-18 Q3-18 Q3-17 Q1-19 Q4-17

Revenue (MEUR)

Q1-18 Q2-18 Q2-19 19% 25% 33% 47% 15% 16% 6%

LTM Full year MEUR 2019 2018 ∆% 2019 2018 ∆% 2018/2019 2018 Revenue 50.1 49.4 1.4 % 98.3 94.6 4.0 % 193.2 189.4 Organic revenue growth 1.1 % 3.3 % Adjusted EBITA 7.1 7.4 -3.9 % 13.9 13.0 6.3 % 26.2 25.4 Adjusted EBITA margin 14.2 % 15.0 % 14.1 % 13.8 % 13.6 % 13.4 % April - June January - June

6%

LTM Full year MEUR 2019 2018 ∆% 2019 2018 ∆% 2018/2019 2018 Revenue 19.3 20.5 -6.2 % 38.2 40.7 -6.2 % 77.7 80.3 Organic revenue growth

• 8.6 %
• 9.1 %

Adjusted EBITA 2.2 2.7 -19.7 % 3.4 4.5 -24.8 % 6.0 7.1 Adjusted EBITA margin 11.5 % 13.4 % 8.9 % 11.1 % 7.7 % 8.8 % April - June January - June

PH NA organic revenue in constant FX rates

Patient Handling

Revenue Q2: organic decline -8.6%

• PH EU reported a weaker quarter with organic decline vs Q2-18. This on the back of stock-up at

certain key distributors in Q1-19

• Decreased revenue in NA vs Q2 last year (-9.2%), but sequential growth vs Q1-19 (4.8%). The

lower revenue was principally due to lower Institutional sales in the US. EBITA Q2: adjusted margin 11.5% (13.4%)

• Decreased gross margin explained by product mix and lower cost absorption in NA
• Operating expenses decreased following the restructuring programme launched in Q2-18
• Profitability flat in the European business and healthy margins

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15 14 13 15 14 13 14 12 13 Q3-18 Q3-17 Q2-18 Q4-17 Q1-19 Q1-18 Q4-18 Q2-19 Q2-17 MEUR

Update on North America actions

6

Key Q2 achievements:

• PH NA sequential growth in Q2 vs Q1 of 4.8%
• Improved proposal pipeline and increased win

rate, however still below target levels

• Around 1/3 of the US institutional sales force

redeployed and replaced end of Q2

• Introduced the Elite Dealer program to propel

homecare sales (PH and Stairlifts)

• Key recruitments in order to cash project:
• Customer service director
• Logistics director
• Improved order to cash process:
• Improved customer/technical service

response time and resolution rate

• Increased number of fulfilled shipments on

time Key Q3 to Q4 activities:

• Sales force effectiveness and geographical presence:
• Continued focus on increased activity (call rate,

number of visits, etc.) and quality (pre-tender work, win-rate, etc)

• Recruit new VP of institutional sales in the US
• Improved value proposition:
• Increase recurring sales of high margin “below-the-

bar” products

• Introduce “full solution” sales approach
• Implement new HUB setup:
• Switch a majority from full service Hub:s to

regional sales offices

• Assess future footprint
• Increased focus on IDN:s and VA to maximize value of

existing and new contracts. Recruit VP corporate accounts to drive this initiative

• Launch 1100 in Q4

Puls divestment

Background:

• This is 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 Mediq International BV
• Signed and closed on 22 May 2019

Financial impact:

• Total consideration: 10.9 MEUR (106 MNOK)
• Pre-tax capital gain of 4.3 MEUR
• EV / adjusted EBITA 7.6x
• Medium-term growth and margin expectations below Group average

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Puls

Q1 Q2 Q3 Q4 Q1

MEUR

2018 2018 2018 2018 2019

Revenue 6.2 5.4 4.9 4.7 5.1 Adjusted EBITA 0.4 0.5 0.1 0.2 0.4 Adjusted EBITA margin 6.2 % 9.1 % 2.7 % 4.0 % 7.4 %

Summary Q2 2019

• Organic growth -1.8%:
• Stairlifts posted good organic growth of 4.6% (NA: 5.6%) and stable

EBITA margin

• Vehicle Accessibility reported lower revenue vs last year. Lower margin

driven by product mix

• PH reported negative organic growth of -8.6%. However, sequential

growth vs Q1-19 for PH-NA

• Adjusted EBITA margin declined to 9.3% (10.2%) explained by lower gross

margin from unfavorable product mix

• Organic growth in H2-19 vs H2-18 expected to be in our 4-6% target range:
• Continued good momentum in the Stairlifts business
• Vehicle Accessibility expected to deliver organic growth in H2-19 vs H2-

18

• PH NA return to organic growth may be delayed 1 to 2 quarters

compared to our previous communicated target (second half of 2019)

• Adjusted EBITA margin expected to increase in H2-19 vs H1-19 (8.4%)
• Continued increased focus on product development: Successful launch of

1100 on the important UK market in Q2. 1100 to be launched in all markets in 2019

• Continued focus on evaluating new markets and acquisition targets
• Macro trends remain favorable

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Q&A

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.

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Appendices

12

*The pay-out decision will be based on Handicare’s financial position, investment needs, acquisition opportunities and liquidity position. ** Excluding IFRS 16 impacts

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, with flexibility for strategic activities** An adjusted EBITA margin exceeding 12 percent in the medium-term

FINANCIAL TARGETS

LTM 2019 organic: 1.0% LTM 2019: 7.5% 3.2x as at 30 June 2019

Dividend 2019: 5 cent per share, 26% of the net profit

Q2 revenue and adjusted EBITA bridges

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PH Q2-18 Acc

• 0.5

Q2-19 7.2 Other

• 0.3

0.1

6.5

• 4%

Growth

• 20%

4% n/a

Q2-18 7.2

• 1.2

Sales Margin

0.7

Opex

0.1

Depreciation Q2-19 6.5

• 0.2

Margin 10.2%

• 1.8p.p

0.7.p 0.1p.p

9.3%

Q2 Adjusted EBITA bridge by SBU Q2 Adjusted EBITA bridge by component

• 10%

FX Q2-19 Q2-18

0.7

Q2-18 FX Adj

0.5

Acc PH

• 1.8

70.0 70.7 69.4

• 1.8%

1% Organic growth

Q2 Revenue bridge by SBU

• 9%

MEUR MEUR MEUR

Full year MEUR 2019 2018 2019 2018 2018 Adjusted EBITDA

7.3 8.1 13.2 13.8 24.4

Inventory

1.7

• 0.6
• 0.4
• 1.1

0.5

Accounts receivable

• 0.4
• 1.4
• 0.0
• 3.9
• 1.8

Accounts payable

• 6.8

4.0

• 6.3

4.2 5.7

Other receivables/liabilities

• 0.0
• 1.2
• 3.6
• 2.9
• 5.7

Change in NWC

• 5.5

0.7

• 10.4
• 3.8
• 1.3

Tangible assets

• 0.3
• 0.6
• 0.7
• 1.0
• 2.1

Intangible assets

• 0.7
• 0.8
• 1.2
• 1.9
• 3.8

Total capex

• 1.0
• 1.4
• 2.0
• 2.8
• 5.9

Adjusted operating cash flow

0.7 7.4 0.9 7.2 17.2

KPI:s Paid tax

• 0.2
• 0.4
• 0.3
• 1.1
• 1.6

Adjusted OCF / Adjusted EBITDA 10% 92% 7% 52% 70% Net debt (excl IFRS 16) 76.6 90.8 76.6 90.8 80.5 Net debt / Adjusted LTM EBITDA (excl IFRS 16) 3.2 3.3 3.2 3.3 3.3 April - June January - June

Cash flow

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Adjusted OCF: 0.7 MEUR (7.4)

• Other specified items paid in Q2-19: 0.5 MEUR (mainly severance costs)
• Increased net working capital (reduced inventory and timing of payments of AP)
• Q2-19 capex of 1.0 MEUR (1.4% of revenue)
• Tax payments related to North America (Canada)

Net debt / adjusted EBITDA 3.2x (excl IFRS 16)

• RCF of 40 MEUR undrawn at quarter end and cash balance of 29.1 MEUR
• Dividend of 2.9 MEUR paid out in May 2019
• Consideration for Puls of 10.9 MEUR received in May 2019
• Unpaid other specified items: 1.6 MEUR at 30 Jun 2019

Group 30 Jun 30 Jun 31 Dec MEUR 2019 2018 2018 Intangible assets 47.4 51.0 49.1 Goodwill 164.4 163.8 162.8 Property, plant and equipment 8.4 10.3 9.7 Right-of-use assets 27.6

• Deferred tax assets

7.3 6.5 8.0 Other non-current assets 0.2 0.2 0.2 Total non-current assets 255.3 231.8 229.7 Inventory 32.8 37.4 35.6 Accounts receivable 42.1 46.0 43.7 Tax receivables 0.2 1.6 0.1 Other current assets 3.6 3.8 3.3 Cash and cash equivalents 29.1 15.7 23.6 Total current assets 107.9 104.5 106.3 Total assets 363.1 336.3 336.0 Total equity 179.9 167.9 171.3 Provisions for pensions 0.2 0.4 0.2 Deferred tax liabilities 8.0 8.9 8.3 Advance payments 2.4 2.1 2.4 Other liabilities 0.4 1.0 0.4 Lease liabilities 22.6

• Interest-bearing loans

104.7 105.0 103.0 Total long-term liabilities 138.3 117.4 114.3 Interest-bearing loans 0.0 0.1 0.0 Lease liabilities 4.9

• Accounts payable

23.5 29.2 30.5 Other liabilities 0.7 1.8 1.1 Accrued expenses and deferred income 15.8 19.9 18.7 Total current liabilities 45.0 50.9 50.4 Total shareholders' equity and liabilities 363.1 336.3 336.0

Balance sheet

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From 1 January 2019, the Group applies IFRS 16 Leases. Therefore, the balance sheet for 2019 is not fully comparable with 2018. Refer to the Quarterly report (Q2 2019) for a specification of the impact.

MEUR 2019 2018 ?% 2019 2018 ?%

Adjusted EBITA

6.5 7.2 -9.8 % 11.5 11.9 -2.9 %

IFRS 16 impact - Operating costs

1.5

• 2.9
• IFRS 16 impact - Depreciation
• 1.4
• 2.7
• Reported EBITA

6.6 7.2 -8.2 % 11.8 11.9 -1.1 % April - June January - June

IFRS 16 impact on EBITA

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Note: From 1 January 2019, the Group applies IFRS 16 Leases. To facilitate comparison between the periods, the performance measures in this presentation are presented excluding the impacts from IFRS 16. The transition impacts are set out above.