Interim report January – June 2014

Second quarter April-June 2014

• Net sales amounted to SEK 69.7 million (71.3), down 2.2 percent. Changes in the USD and EUR exchange rates had a positive impact of SEK 0.1 million on net sales.
• Cash flow from operating activities totaled SEK 13.6 million (1.9).
• Operating profit totaled SEK 3.2 million (5.6).
• Net profit was SEK 1.7 million (5.9).
• Earnings per share amounted to SEK 0.37 (1.25).

Interim period January-June 2014

• Net sales totaled SEK 143.0 million (134.7), up 6.2 percent. Changes in the USD and EUR exchange rates had a positive impact of SEK 0.2 million on net sales.
• Cash flow from operating activities totaled SEK 22.7 million (3.4).
• Operating profit totaled SEK 9.5 million (6.1).
• Net profit was SEK 6.0 million (4.2).
• Earnings per share amounted to SEK 1.28 (0.90).

Key events during the second quarter

Work on improving cash flow

The efficiency-enhancement program, called the P20 project, that began in the first quarter of 2014 continued and was intensified. The aim is to improve cash flow and profitability to achieve the company’s profitability target of an EBITDA margin of 15 percent.

Ownership change

One of the company’s largest shareholders, Stiftelsen Industrifonden, sold all of its shares in Boule during the quarter. The buyers include former shareholders Nortal Investment AB (Staffan Persson), Linc AB (Bengt Julander) and Thomas Eklund, which are now the company’s second, third and fourth largest shareholders, respectively. Thomas Eklund has been represented on the Board since the Annual General Meeting.

New employee share option program

The Annual General Meeting resolved on a new employee share option program. A total of 178,750 options (including hedging) were issued to management and key individuals in the Group. When fully exercised, the options generate a dilution of 3.8 percent (including hedging). Each option entitles the holder to subscribe for new shares in the company during the second half of 2017 at a price of SEK 68.18 per share.

Comments from the CEO

Instrument sales during the first six months of the year were slightly higher than in the preceding year and sales of reagents for proprietary instruments continued to increase in line with expectations. However, the period was affected by a certain level of cautiousness from the emerging markets of Brazil, Russia and China. India, which noted a weak first quarter, recovered slightly at the end of the period. We can see that fluctuations between individual quarters are persisting, but we believe that we will continue to capture market shares in our key markets. It is gratifying that cash flow continued to improve, which is largely a result of our efficiency-enhancement program.

Sales for the second quarter of 2014 were slightly lower year-on-year, although sales rose slightly more than 6 percent during the first six months of the year, which highlights the stability of our business model. Nevertheless, we see customers’ decision-making times are longer due to the weak economic trend in several of our largest markets. The gross margin declined marginally during the period due to the price pressure on instruments. However, we reported an improved operating profit for the first six months of 2014 compared with the year-earlier period.  Our efficiency-enhancement program that was initiated in the first quarter is continuing and contributed to the improved cash flow from operating activities. 

Sales of instruments and reagents for proprietary systems increased during the first six months of 2014. In Europe, primarily sales of instruments for veterinary systems rose, while sales of human systems increased at a slower rate. Latin America and Africa noted favorable sales during the first six months.  Asia was negatively impacted by our sales changes in India and the continued weak sales trend in five-part systems. Sales in India recovered slightly during the second quarter.

In the US, sales of instruments for human systems were slightly weaker year-on-year. This was also the case for sales of veterinary systems in the US. As in the past, sales vary between different quarters due to unforeseen variations in purchasing patterns in the many countries – more than 100 – that we export to. Accordingly, it is not possible to draw any conclusions for one specific quarter. The same applies to sales of OEM products (consumables for other diagnostic companies under their brands), where we noted slightly lower sales in the quarter, which was primarily due to delays from some of our new OEM customers. However, we believe that the long-term trend will be positive.

Sales of the CDS Brand (consumables for other manufacturers’ instruments under own brands) remained unchanged in the US, which to date has been the dominant geographical market. We are now focusing intently on markets outside the US and we believe that this venture will have an impact during the current year.

Finally, we relocated the Swedish companies to new tailor-made premises. The move will enhance the efficiency of production, provide greater flexibility in training users and customers and also provide a platform for future expansion. In conjunction with the move, we also implemented an extensive upgrade of our entire IT environment.

Ernst Westman

President and CEO