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Sectra’s nine-month interim report: Increase in order bookings paves way for stability and growth

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The IT and medical technology company Sectra (STO: SECT B) increased its order bookings to SEK 549.4 million (256.5) during the third quarter. For the nine-month period May 2014–January 2015, order bookings increased 78.8% to SEK 1,181.8 million. Part of the order bookings derived from a transient effect in the UK, which will not be sustainable during the years ahead. At the same time, long-term customer contracts, which provide stable revenues extending over many years, accounted for a large part of the increase. The order bookings reflect the customers’ confidence in Sectra which, for the second consecutive year, tops Best in KLAS, the industry’s most important customer satisfaction survey for IT systems in US healthcare. Sectra was also ranked highest in the new international survey conducted by KLAS. A high level of customer satisfaction, a large share of long customer contracts and long-term investments in products and services that benefit society pave the way for stability and growth at Sectra.

Nine-month period in figures

  • The Sectra Group’s order bookings increased 78.8% to SEK 1,181.8 million (661.1).
  • Net sales for the nine-month period rose 18.8% to SEK 693.1 million (583.2). Sales and licensing of patents in Business Innovation during the first quarter of the fiscal year had a positive impact of SEK 16.3 million on sales and operating profit. Excluding this nonrecurring item, net sales increased 16.0% to SEK 676.8 million.
  • Operating profit rose 46.0% to SEK 107.9 million (73.9), corresponding to an operating margin of 15.6% (12.7). Excluding sales and licensing of patents, operating profit increased 24.0% to SEK 91.6 million, corresponding to an operating margin of 13.5%.
  • Cash flow after changes in working capital amounted to SEK 32.1 million (104.3). Several major long-term customer projects are in the installation phase, which is having an adverse impact on cash flow.

Torbjörn Kronander, President and CEO of Sectra AB, comments

“I am truly delighted that for the second consecutive year Sectra has been rated top of the industry’s most important customer satisfaction survey for IT systems in healthcare. The survey was performed by KLAS and our system for managing medical images, Sectra PACS, was ranked highest, both internationally and in the US. From the comments made in the customer assessments, it is clear that our employees and also the stability and easy-to-use nature of our system are to thank for Sectra’s high ratings. The survey responses show that customers have great confidence in Sectra and that makes me very proud.

“The fact that the customers trust Sectra is also reflected in our sales. Compared with the preceding year, we doubled our order bookings in the third quarter. However, order bookings can vary sharply from quarter to quarter due to a number of very large multiyear customer contracts. Sectra is showing growth in the US in particular, where we are beginning to note the effects of our high ranking in the preceding year’s (2013) KLAS survey, and in the UK, where we nearly tripled our order bookings during the nine-month period. However, the situation in the UK largely reflects a transient local effect deriving from the fact that many hospitals feel compelled to acquire new systems or to renew their agreements before summer 2015. Accordingly, the level of orders we have recently seen in this market will not be repeated during the years ahead.

“The Secure Communications business area has been a concern for some time. However, the area showed somewhat better earnings for the third quarter as a result of higher revenue from customers outside Sweden. This makes me cautiously positive, but I remain worried about the weak performance of encryption systems in Sweden.

“The past year’s robust order bookings encompass a large number of new long-term agreements with major customers, which means that we have many sizeable customer projects in the installation phase. Initially, these projects are having an adverse impact on Sectra’s cash flow and operating margin, but when the projects move into the maintenance and support phase, they will contribute to a stable trend for the Group. With the great confidence shown by customers, our dedicated employees and Sectra’s strong financial position, we are working to build success for our customers, which is what will ultimately make the greatest contribution to increasing Sectra’s value.”

For further comments and information, see the attached interim report.

Teleconference for presentation of the interim report

with President Torbjörn Kronander and CFO Simo Pykälistö

Time: March 10, 2015, 09:30 a.m.

To participate, call:

  • Sweden +46 (0)8 856642691
  • UK +44 (0)2034281400
  • US +1 855 7532236

The presentation will be held in English and can also be followed online via: http://media.fronto.com/cloud/sectra/150310/. A recorded version will be available on Sectra’s website after the conference via: www.sectra.se/irwebcast.

The information in this report is such that Sectra AB (publ) is obligated to disclose in compliance with the Securities and Clearing Operations Act and/or the Financial Instruments Trading Act. The information was issued to the media for publication on March 10, 2015, at 08:00 a.m. (CET).

For further information, please contact:
Dr. Torbjörn Kronander, CEO and President Sectra  AB, +46 (0) 705 23 52 27
Pictures: http://flickr.com/photos/sectramedicalsystems

About the Sectra Group
Sectra was founded in 1978 and has its roots in Linköping University in Sweden. The company’s business operation includes cutting-edge products and services within the niche segments of medical IT and secure communication. Sectra has offices in 12 countries and operates through partners worldwide. Sales in the 2013/2014 fiscal year totaled SEK 853 million. The Sectra share is quoted on the NASDAQ OMX Stockholm exchange. For more information, visit www.sectra.com

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Interim report Sectra Nine-month report Torbjörn Kronander

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I am truly delighted that for the second consecutive year Sectra has been rated top of the industry’s most important customer satisfaction survey for IT systems in healthcare. The survey was performed by KLAS and our system for managing medical images, Sectra PACS, was ranked highest, both internationally and in the US. From the comments made in the customer assessments, it is clear that our employees and also the stability and easy-to-use nature of our system are to thank for Sectra’s high ratings. The survey responses show that customers have great confidence in Sectra and that makes me very proud.
Torbjörn Kronander, President and CEO of Sectra AB
The fact that the customers trust Sectra is also reflected in our sales. Compared with the preceding year, we doubled our order bookings in the third quarter. However, order bookings can vary sharply from quarter to quarter due to a number of very large multiyear customer contracts. Sectra is showing growth in the US in particular, where we are beginning to note the effects of our high ranking in the preceding year’s (2013) KLAS survey, and in the UK, where we nearly tripled our order bookings during the nine-month period. However, the situation in the UK largely reflects a transient local effect deriving from the fact that many hospitals feel compelled to acquire new systems or to renew their agreements before summer 2015. Accordingly, the level of orders we have recently seen in this market will not be repeated during the years ahead.
Torbjörn Kronander, President and CEO of Sectra AB
The past year’s robust order bookings encompass a large number of new long-term agreements with major customers, which means that we have many sizeable customer projects in the installation phase. Initially, these projects are having an adverse impact on Sectra’s cash flow and operating margin, but when the projects move into the maintenance and support phase, they will contribute to a stable trend for the Group. With the great confidence shown by customers, our dedicated employees and Sectra’s strong financial position, we are working to build success for our customers, which is what will ultimately make the greatest contribution to increasing Sectra’s value.
Torbjörn Kronander, President and CEO of Sectra AB