Interim report January – September 2018

Low organic growth

July – September 2018 

• Revenue increased to MEUR 70.1 (69.2)
• Organic growth was 1.1%
• The gross margin was 43.0% (42.4)
• Adjusted EBITA amounted to MEUR 6.1 (6.3), corresponding to a margin of 8.6% (9.1)
• EBIT amounted to MEUR 4.6 (0.3), corresponding to a margin of 6.6% (0.5)
• Adjusted operating cash flow amounted to MEUR 1.0 (2.8)
• Vehicle Accessibility was negatively impacted by delayed deliveries due to new regulations. The negative effects on revenue and EBITA are estimated at c. MEUR -0.5 and c. MEUR -0.2 respectively
• Staffan Ternström was appointed President and CEO effective 14 August
• The organic revenue growth for the financial year is estimated to be in the low end of our mid-term target range of 4% to 6%

January – September 2018 

• Revenue increased to MEUR 217.0 (213.9)
• Organic growth was 3.7%
• The gross margin was 42.5% (42.8)
• Adjusted EBITA amounted to MEUR 18.8 (20.0), corresponding to a margin of 8.7% (9.4)
• EBIT amounted to MEUR 12.8 (9.6), corresponding to a margin of 5.9% (4.5)
• Adjusted operating cash flow amounted to MEUR 9.1 (7.6)
• The net negative effect of postponed deliveries in Vehicle Accessibility is estimated at c. MEUR -2.0 in terms of revenue and c. MEUR -1.0 in terms of EBITA
• Expenses relating to the reorganisation amounted to MEUR 2.0 during the nine-month period and were expensed in full during the second quarter

CEO’s comments

My first impressions at Handicare
I have now been at Handicare for 70 days and have had the opportunity to meet many customers and employees. I have travelled to all our main sites and visited most of our key markets. After this intensive induction period I believe that I have a good overview of the most pronounced opportunities and risks to Handicare, but obviously my understanding of the business and its markets will develop over the coming quarters.

I also attended Rehacare, the largest international trade fair in the field of rehabilitation and care with more than 50,000 visitors and exhibitors from more than 40 countries. Handicare showcased primarily two new solutions: a new friction based stairlift for straight staircases, and the faster and simpler staircase design system used for the installation of stairlifts. The new system reduces design time for sales personnel by 60%. The launches were very well received and interest exceeded our expectations.

I am pleased to note that the company has good products and solutions and is comprised of committed and engaged employees. Furthermore, we hold strong positions in many markets, of which several have a good underlying growth. Given the above, I look into the future with confidence.

Third quarter
Sales of stairlifts continued to progress favourably in Europe and North America and we are strengthening our market positions. Vehicle Accessibility continued to have delivery issues with suppliers and, during the quarter, these were related to the new emission regulations. In total for Accessibility, which accounts for 65% of revenue in the Group, revenue grew organically by 2.8% and the adjusted EBITA margin increased to 15.4% (12.2).

Patient Handling revenue declined organically by 5.5%, even though Europe posted continued good organic growth. The adjusted EBITA margin declined to 8.7% (15.6) due to lower volumes and decreased gross margin in North America. A turnaround of the North American business is one of my top priorities for the coming quarters.

Puls continued to report increased revenue and improved margins.

Group revenue grew organically by 1.1%. The adjusted EBITA margin declined to 8.6% (9.1) as the performance in Patient Handling could not be offset by the continued positive margin trend in Accessibility and Puls.

Improvement program
In Patient Handling North America, the sales organisation and sales management will be strengthened. The work with Commercial Excellence will be intensified and upgraded. The transition to the new ERP system implemented during the quarter is expected to increase productivity and to improve performance management. The overarching purpose is to ensure a more efficient and focused market approach. I am convinced that these efforts will be successful but it will take a few quarters before we see the full effect of these initiatives.

In the medium term, we will improve customer focus within the organisation and assign increased importance to always applying a customer- and end-user-centric approach. As a result, we will evaluate our offering in terms of products and solutions and the time to market for new launches. We will also review our pricing strategy and evaluate and optimise our sales channels. Evaluating new markets and acquisition targets continue to be an important part of our strategy.

Full year estimate
The outlook for Q4 is somewhat clouded by the continued uncertainty in terms of (i) deliveries of cars in our Vehicle Accessibility business and (ii) development in Patient Handling North America. For this reason we estimate that the organic revenue growth for the financial year will be in the low end of our mid-term target range of 4% to 6%.

Staffan Ternström
President and CEO

Auditors’ review report
To the Board of Directors of Handicare Group AB (publ), corporate identity number 556982–7115

Introduction
We have reviewed the condensed interim report for Handicare Group AB (publ) as at 30 September 2018 and for the nine months period then ended. The Board of Directors and the President and CEO are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review
We conducted our review in accordance with the International Standard on Review Engagements, ISRE 2410 Review of Interim Financial Statements Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing standards in Sweden.

The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Group, and in accordance with the Swedish Annual Accounts Act regarding the Parent Company.

Stockholm, October 24, 2018
Ernst & Young AB

Stefan Andersson-Berglund
Authorised Public Accountant

Telephone conference
A telephone conference, hosted by Staffan Ternström, President and CEO, and Stephan Révay, CFO, will be held at 10:00 a.m. CET on 24 October 2018. To participate, please register in advance using the following link http://emea.directeventreg.com/registration/8364337

A presentation will be available at www.handicaregroup.com/investors.

For more information, contact:
Staffan Ternström, CEO, Tel: +46 725 490 029
Stephan Révay, CFO, Tel: +46 729 666 532
Boel Sundvall, IR, Tel: +46 723 747 487

This information is information that Handicare Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 8:00 a.m. CET on 24 October 2018. 

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, vehicle adaptations and medical equipment. Handicare is a global company with sales in more than 20 countries and is a market leader in this field. The head office is in Stockholm, Sweden and manufacturing is located at six sites distributed across North America, Asia and Europe. In the 12-month period to September 2018, revenue amounted to MEUR 287 and the adjusted EBITA margin was 8.7%. Employees numbered around 1,200 and the share is listed on Nasdaq Stockholm. For more information, www.handicaregroup.com. 

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