Interim report May – July 2015/16

• Order bookings increased 8 percent to SEK 2,536 M (2,341), equivalent to a decrease of 5 percent based on constant exchange rates.
• Net sales increased 20 percent to SEK 2,239 M (1,865), equivalent to an increase of 4 percent based on constant exchange rates.
• Gross margin improved by 6 percentage points to 40 percent (34).
• A comprehensive action program was launched in the first quarter. The objectives are to improve growth, increase profitability, reduce costs and focus on cash flow. The program includes cost savings of SEK 450 M.
• EBITA before non-recurring items amounted to SEK 41 M (-38). Currency effects amounted to SEK -20 M. Non-recurring items amounted to SEK -30 M and is mainly related to the comprehensive action program.
• A new organization, including changes to the Executive Management team, is effective from July 7.
• Net income amounted to SEK -129 M (-137). Earnings per share amounted to SEK -0.34 (-0.36) before dilution and SEK -0.34 (-0.36) after dilution.
• Cash flow after continuous investments amounted to SEK -564 M (-670).

Outlook
We expect negative growth in net sales for the first half of 2015/16, while growth is expected to return during the second half of 2015/16.

 
President and CEO comments
To reverse Elekta’s weak financial performance during 2014/15 we launched a comprehensive action program with the objectives of strengthening growth, improving profitability, reducing costs and focusing on cash flow. It is gratifying to note that sales rose 4 percent (based on constant exchange rates) in the first quarter, and that the gross margin strengthened 6 percentage points to 40 percent. With the new organization in place and focused on implementation of the action program, I feel confident that this will yield returns.

Market growth
Total global demand and the underlying medical need for radiation therapy remain highly favorable. We expect the global market to grow by some 3-5 percent per year in the coming years. This is lower than the historical average. Services and software are expected to grow in the higher range of the interval. Emerging markets are still associated with higher risks and lower economic growth.

Order bookings
Order bookings for the first quarter increased by 8 percent, corresponding to a decline of 5 percent based on constant exchange rates. We delivered double digit growth in North and South America, with strong performance in the US. Order bookings in region Europe, Middle East and Africa declined in line with our expectations. This is mainly due to a challenging year-on-year comparison, as order bookings in the first quarter last year were stronger than usual. Order bookings in region Asia Pacific grew by 12 percent based on constant exchange rates with strong performance in Australia, India and China, however, South East Asian markets remain weak.

Net sales and EBITA
Net sales rose by 20 percent in the first quarter, and by 4 percent based on constant exchange rates. Growth was mainly driven by strong performance in software and services, combined with favorable development in regions North and South America and Europe, Middle East and Africa. The solid growth in software and services contributed to the strengthened gross margin of 40 percent (34). EBITA before non-recurring items increased by SEK 79 M to SEK 41 M (-38).

Cash flow
Cash flow is developing according to plan. Cash flow for the quarter was slightly better than last year and is expected to continue to improve during the coming quarters. Rolling 12 months ratio of cash flow from operating activities in relation to EBITDA before non-recurring items was 127 percent (126 for fiscal year 2014/15).

New organization and a comprehensive action program
We continue the implementation of our program to improve growth, profitability and cost reductions that we launched in the beginning of this fiscal year. A new organization was effective as of July 7 and during the summer we have performed a thorough review of the efficiency and effectiveness of our operations. We are targeting cost savings of SEK 450 M to be realized within two years. In the first quarter, non-recurring costs related to the program amounted to SEK 29 M.

Leksell Gamma Knife® IconTM approved in the US
I am pleased that our Leksell Gamma Knife Icon has been granted FDA 510(k) clearance and is now available in core markets throughout Europe and the US. The Icon system is the most precise radiosurgery device on the market, and the only technology with ultra-precise micro-radiosurgery capabilities. Reception has been very positive, and in addition to new system sales, it is also possible to upgrade the installed base of over 200 Leksell Gamma Knife® Perfexion® systems to Icon.

The Atlantic project is progressing well and we have established an Atlantic R&D facility in Crawley which we are using to assemble and validate the system. Meanwhile we are installing the second consortium system for research at MD Anderson Cancer Centre in Houston, USA. We expect all research consortium sites to be installed within the next 16 months.

Outlook for the full-year remain unchanged
We reiterate our outlook. We expect negative growth in net sales during the first half of 2015/16, while growth is expected to return during the second half of 2015/16.

Tomas Puusepp, President and CEO

 
Conference call
Elekta will host a telephone conference at 10:00 – 11:00 CET on September 1, with President and CEO Tomas Puusepp and CFO Håkan Bergström.
To take part in the conference call, please dial in about 5-10 minutes in advance.
Sweden: +46 8 566 426 92 UK: +44 203 428 14 13, US: +1 855 753 22 36

The telephone conference will also be broadcasted over the internet (listen only). Please use the link:
http://event.onlineseminarsolutions.com/r.htm?e=1032100&s=1&k=32CB2CD1246774C0E07CA0A5018AF47C

Financial information                    
Interim report May – October 2015/16                                    December 4, 2015
Interim report May – January 2015/16                                    March 2, 2016
Year-end report May – April 2015/16                                      June 2, 2016

 
For further information, please contact:
Håkan Bergström, CFO, Elekta AB (publ)
+46 8 587 25 547, hakan.bergstrom@elekta.com

Johan Andersson, Director and Head of Investor Relations, Elekta AB (publ)
+46 702 100 451, johan.andersson@elekta.com

Tobias Bülow, Director Financial Communication, Elekta AB (publ)
+46 722 215 017, tobias.bulow@elekta.com

Elekta AB (publ)
Corporate registration number 556170-4015
Kungstensgatan 18, ­Box 7593, SE 103 93 Stockholm, Sweden

The above information is such that Elekta AB (publ) shall make public in accordance with the Securities Market Act and/or the Financial Instruments Trading Act. The information was published at 07:30 CET on September 1, 2015.