Interim report January - June 2020
A quarter characterized by Covid-19. Despite this, adjusted EBITA was positive as a result of the rapid realignment of operations but also through structural improvement measures through the Lift Up Program. Handicare’s financial position remains strong.
Second quarter 2020
- Revenue amounted to MEUR 39.0 (62.9).
- Organic growth was -31.6%.
- The gross margin was 40.1% (41.2).
- Adjusted EBITA amounted to MEUR 0.9 (5.3), corresponding to a margin of 2.4% (8.5).
- EBIT was MEUR -8.7 (3.8), including Other specified items of MEUR 8 relating to the Lift Up Program.
- Net profit (including discontinued operations) amounted to MEUR -28.2 (6.4). This includes realized capital loss from the divestment of Patient Handling Europe of MEUR -13.9, including transaction costs.
- Earnings per share (including discontinued operations) before and after dilution amounted to EUR -0.48 (0.11).
- Adjusted operating cash flow of MEUR 2.0 (0.9) and leverage improved to 2.2x.
- The divestment of Patient Handling Europe was completed on May 4.
- Decision to establish a local production facility for stairlifts in the US in 2021.
- Randi Binstock was appointed President, Patient Handling North America effective from 1 July 2020.
Covid-19 effects and financial impact
- At Group level, sales decreased organically by -35% in April - May, improving to -25% in June due to countries previously in lockdown opening up.
- Provided there are no more strict lockdowns during the third quarter, we expect sales to improve gradually.
- In the quarter, Handicare received government grants totaling MEUR 1.6, relating to personnel.
- Handicare’s financial position and liquidity remain solid.
CEO’s Comments
Dear Shareholders,
During the quarter, Covid-19 impacted Handicare’s operations across all segments with revenues being reduced, particularly in markets that were subject to extensive lockdowns. The Group’s swift initiatives to scale down both direct and indirect costs has helped significantly to mitigate the negative impact on profitability. Short-term cost reductions have been achieved through a down-scaling of resources and by implementing cost freeze programs throughout the organisation. In addition, Handicare has successfully launched the Lift Up Program to implement a range of structural cost reduction initiatives which will improve the medium-term performance and efficiency of the Group.
As previously communicated, Group revenues declined 35% during April and May compared to the same period last year. In June, however, we saw that all markets started to slowly recover and we note a significant improvement in markets that have started to open up again. For June revenues dropped 25% versus last year and for the full second quarter, revenues dropped by 32% compared to the same period last year. Notwithstanding this very challenging environment, we report MEUR 0,9 in Adjusted EBITA for the quarter.
The Lift Up Program progressing ahead of plan
In conjunction with the first quarter report, we announced the launch of the Lift Up Program – a three-phased program aiming structurally and sustainably to lift the company to better performance. At the Capital Markets Update on June 12th, we presented cost reduction activities targeting an annual positive impact on Adjusted EBITA of MEUR 8, with an expected full run-rate effect during 2020. As most of the phase I activities are already in progress, we are ahead of the plan with approximately 90% of the full impact taking effect already by July.
In Patient Handling North America, a three-step plan to turn around the performance has been initiated. Several activities aiming to stabilize and improve the profitability have already been put into practise. On June 2nd, we also announced the appointment of Randi Binstock as the new President of the business unit.
Accelerating growth in Accessibility
Going forward, our priority will be to focus on growth initiatives that leverage the strong underlying fundamentals that characterize the Accessibility market, and our new improved structure. In the short term, emphasis will be put on reducing delivery lead times as well as on reinforcing the competitiveness of our supplier base. In addition, we proceed with selected commercial initiatives connected to product pricing and driving dealer growth across our markets.
Building on our strong growth trajectory in North America, we have also decided to establish a stairlift production site in the US – a high potential market where Handicare has significant opportunities to gain additional market shares. The new site, which will be in full production during 2021, will allow us to considerably shorten lead times in the region, and thus increase our competitive advantage.
Outlook
In spite of the short-term negative effects of the Covid-19 pandemic, the long-term demand outlook for our products and solutions in Accessibility continues to be supported by global megatrends, and indeed the will for people to stay at home longer could even intensify. With most of the Lift Up program initiatives already implemented, we are confident we have established a more competitive cost base. Added to that, the improving trends seen through the second half of Q2 have continued encouragingly with strong order book momentum into July, so far. Current trading trends give us more confidence that barring any pandemic-related setbacks, further improvements can be expected into H2 2020. As a result of these trends, our strong financial position and cash flow dynamics, the streamlined cost base and a gradual market recovery should enable Handicare to gain positive earnings momentum. This will be a supportive backdrop against which to continue to apply our refreshed strategy beyond the current year, and to deliver on the medium-term objectives we have communicated to shareholders.
Johan Ek
President and CEO
Audit review
This interim report has not been reviewed by the company’s auditors.
Telephone conference
A telephone conference, hosted by Johan Ek, President and CEO, and Pernilla Lindén, CFO, will be held at 09.00 a.m. CET on 17 July 2020. To participate, please register in advance using the following link: http://emea.directeventreg.com/registration/2064477
A presentation will be available at www.handicaregroup.com/investors.
Dates for financial reports:
Interim report July - September 2020 5 November 2020
Year-end report 2020 12 February 2021
For more information, contact:
Pernilla Lindén, CFO & IR, Tel +46 708 775 832
This information is information that Handicare Group AB (publ) is required to disclose pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication, through the agency of the contact persons set out above, at 8:00 a.m. CET on 17 July 2020.
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.
About Handicare
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 and vehicle adaptations. Handicare is a global company with sales in some 40 countries and is one of the market leaders in this field. The head office is in Stockholm, Sweden and manufacturing and assembly is located at four sites distributed across North America, Asia and Europe. In the twelve-month period to June 2020, revenue amounted to MEUR 214 and the adjusted EBITA margin was 5.1%. Employees amounted to approximately 850 and the share is listed on Nasdaq Stockholm. For more information, www.handicaregroup.com.