Earnings Release • May 15, 2018
Earnings Release
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January 1 to March 31, 2018
In line with our expectations, the STRATEC Group started the 2018 financial year with a temporary dip in its sales and earnings performance. The year-on-year reduction in quarterly sales was due in particular to the strong previous year's figures, the specific timing of milestone payments being recognized as sales, and customer-induced shifts in orders to the second half of the year. Developments in the first quarter are largely consistent with the expectations reflected in our full-year targets. Based on the latest order forecasts received from our customers, we expect significantly higher growth momentum in the second half of the year. As a result, we still expect to reach the targets we set for 2018.
In the first three months of the year, we once again implemented further measures to structure our processes even more efficiently and prepare the Group for future growth. Particularly worth mentioning here is the launch of a uniform group-wide ERP system. The implementation of this system at our Hungarian and Austrian locations was successfully completed in January. Preparations for the group-wide launch are progressing on schedule.
In addition to recently signed development agreements, we are also in numerous promising project negotiations with existing and potential partners. The long-term growth prospects for our company are thus just as positive as before, a factor also reflected in the further increase in the number of our employees. To be prepared for this expected growth, we decided last year already to significantly extend the premises at our Birkenfeld location. Construction work is expected to begin before the end of the first half of 2018.
In light of the continued positive developments of our company, we are pleased to be able to propose the fourteenth consecutive increase in our dividend, this time to € 0.80 per share, for approval by our shareholders. We would be delighted to welcome you at our Annual General Meeting in Pforzheim on May 30, 2018.
Thank you for the trust you have placed in us.
On behalf of the Board of Management of STRATEC Biomedical AG
Marcus Wolfinger Chief Executive Officer
| € 000s | Q1 2018 | Q1 2017 | Change |
|---|---|---|---|
| Sales | 41,600 | 49,510 | -16.0% |
| Adjusted EBITDA | 6,362 | 8,812 | -27.8% |
| Adjusted EBITDA margin (%) | 15.3 | 17.8 | -250 bps |
| Adjusted EBIT | 4,293 | 6,870 | -37.5% |
| Adjusted EBIT margin (%) | 10.3 | 13.9 | -360 bps |
| Adjusted consolidated net income | 3,533 | 5,369 | -34.2% |
| Adjusted earnings per share (€) | 0.30 | 0.45 | -33.3% |
| Earnings per share (€) | 0.10 | 0.29 | -65.5% |
bps = basis points
1 For comparison purposes, adjusted figures exclude amortizations resulting from purchase price allocations in the context of acquisitions, associated reorganization expenses, as well as other one-off items
STRATEC generated sales of € 41.6 million in the first quarter of 2018 (previous year: € 49.5 million), corresponding to a sales decline at constant exchange rates of 11.8% (reported: -16.0%). The reduction in sales was due in particular to a difficult comparison against a strong period last year, as well as to the specific timing of milestone payments being recognized as sales. Quarterly sales were also adversely affected by diverse internal factors at several key customers. Factors particularly worth mentioning here include temporary destocking effects, as well as sales restrictions on the part of a customer in a major market, which have since been resolved. Based on the latest order forecasts received from these customers, significantly higher acceptance volumes are expected in the second half of the year.
Adjusted EBIT amounted to € 4.3 million in Q1/2018, compared to € 6.9 million in the previous year's period. This corresponds to an adjusted EBIT margin decline of 360 basis points to 10.3% from 13.9% in Q1/2017. The year-on-year reduction in the company's profitability was due in particular to the lower volume of sales and resultant absence of benefits of scale. The significant expansion in the company's workforce, which is directly connected to the increased volume of development work currently underway and the expected future growth, should also be noted in this respect. The positive impact of a further increased share of sales generated with service parts and consumables was more than offset by the above factors.
Given the lower level of operating profitability, adjusted consolidated net income also decreased, in this case by 34.2% to € 3.5 million, versus € 5.4 million in the previous year. The adjusted tax rate for the first quarter amounted to 17.8% (previous year: 21.2%). Adjusted basic earnings per share came to € 0.30, compared with € 0.45 in Q1/2017.
The figures reported for Q1/2018 do not yet account for any potential effects resulting from the first-time adoption of IFRS 15.
For comparison purposes, adjusted figures exclude amortizations resulting from purchase price allocations in the context of acquisitions, associated reorganization expenses, as well as other one-off items. The reconciliation of the adjusted figures with the figures reported in the consolidated statement of comprehensive income is presented in the following tables:
| € 000s | 01.01. – 03.31.2018 |
|---|---|
| Adjusted EBIT | 4,293 |
| Adjustments • Expenses relating to transactions and associated restructuring expenses |
-468 |
| • PPA amortization | -2,372 |
| EBIT | 1,454 |
3
| € 000s | 01.01. – 03.31.2018 |
|---|---|
| Adjusted consolidated net income | 3,533 |
| Adjusted earnings per share in € | 0.30 |
| Adjustments • Expenses relating to transactions and associated restructuring expenses |
-468 |
| • PPA amortization | -2,372 |
| • Current tax expenses | 129 |
| • Deferred tax income | 380 |
| Consolidated net income | 1,202 |
| Earnings per share in € | 0.10 |
Including agency employees and trainees, the STRATEC Group had a total of 1,110 employees as of March 31, 2018. This represents an increase of 10.9% compared with the previous year's reporting date.
To manage its large numbers of development projects, STRATEC continues to seek qualified personnel and expects to report rising employee totals in the quarters ahead.
STRATEC expects to see further major market launches on the part of its customers in 2018, as well as the production launch of 'Kleeya', its internally developed analyzer platform. The market launches of these systems in the quarters ahead are now at an advanced stage of preparation.
Furthermore, STRATEC is currently negotiating numerous additional development and supply agreements with existing and potential new partners. To prepare for the further growth expected to result from these agreements, the company decided in 2017 to convert and significantly extend the premises at its Birkenfeld location. The relevant planning is currently in its final stages and construction work is expected to begin before the end of the first half of 2018. The first stage of construction is scheduled for completion in mid-2019.
To support the company's growth strategy, one major focus in 2018 will be on implementing a uniform group-wide ERP system. This will considerably simplify cooperation between locations and enable us to structure our processes more efficiently. We implemented the system at our locations in Austria and Hungary and thus completed the first stage of the rollout in January 2018 already. Among other measures, we are currently preparing the implementation at our headquarters in Birkenfeld.
Based on current order forecasts received from customers, STRATEC confirms the financial guidance provided for the 2018 financial year. The company therefore continues to expect to generate organic sales growth net of currency items and acquisitions in at least a mid-single-digit percentage range. Given higher sales contributions from products newly launched onto the market and the aforementioned shifts in the timing of sales, STRATEC still expects most of the sales growth budgeted for 2018 to be generated in the second half of the year. In terms of its adjusted EBIT margin, the company still expects to achieve a figure at the previous year's level of around 17%.
This forecast for 2018 does not yet account for any implications resulting from first-time adoption of IFRS 15, as these had not yet been conclusively assessed upon publication of this report. Based on initial, still preliminary assessments, STRATEC expects IFRS 15 requirements to have only a moderate impact on its earnings, financial, and asset position.
Given upcoming market launches and the significant progress being made in numerous project negotiations, STRATEC continues to expect to generate average annual organic sales growth (CAGR) in the high single-digit or low double-digit percentage range in the years ahead. The positive development anticipated in profitability thanks to economies of scale in connection with recent acquisitions will be tempered by temporary increases in investing and developing activities for planned growth with selected customer projects. Overall, STRATEC expects the EBIT margin to remain broadly consistent with recent levels.
Due to the scheduled conversion and extension measures at its Birkenfeld location, the company's investments in 2018 are expected to slightly exceed the previous year's figure.
5
At their meeting on April 9, 2018, the Board of Management and Supervisory Board of STRATEC Biomedical AG decided to propose a dividend payment of € 0.80 per share for the 2017 financial year for approval by the Annual General Meeting on May 30, 2018 (previous year's distribution: € 0.77 per share). Subject to approval by the Annual General Meeting, the distribution paid to shareholders would rise for the fourteenth consecutive year since payment of the first dividend in 2004. STRATEC thus plans to maintain its continuity-based dividend policy. As the company is continuing to focus on internal and external growth opportunities, it may temporarily deviate from this approach. Such opportunities may arise due to larger-scale acquisitions or to the potential need for advance financing for major projects.
The Board of Management and Supervisory Board also decided to propose to the Annual General Meeting that STRATEC Biomedical AG should be converted into a European Company (Societas Europaea, SE) with the name STRATEC SE. The Board of Management and Supervisory Board believe that this planned change of legal form reflects STRATEC's own understanding of itself as a company with an international outlook.
| € 000s | 03.31.20181 | 12.31.2017 |
|---|---|---|
| Non-current assets | ||
| Goodwill | 41,733 | 42,018 |
| Other intangible assets | 67,584 | 68,708 |
| Property, plant and equipment | 36,099 | 35,701 |
| Financial assets | 420 | 240 |
| Deferred taxes | 385 | 128 |
| 146,222 | 146,795 | |
| Current assets | ||
| Inventories • Raw materials and supplies • Unfinished products, unfinished services • Finished products and merchandise |
20,901 10,083 5,199 |
15,380 6,367 6,133 |
| 36,183 | 27,880 | |
| Receivables and other assets • Trade receivables • Receivables from construction contracts • Receivables from associates • Financial assets • Other receivables and assets • Income tax receivables |
29,773 5,556 19 9,846 4,240 2,060 |
39,126 7,210 24 12,498 4,563 1,543 |
| 51,493 | 64,964 | |
| Cash and cash equivalents | 30,598 | 24,137 |
| 118,274 | 116,981 | |
| 264,496 | 263,776 |
| € 000s | 03.31.20181 | 12.31.2017 |
|---|---|---|
| Shareholders' equity | ||
| Share capital | 11,921 | 11,921 |
| Capital reserve | 22,452 | 22,417 |
| Revenue reserves | 122,260 | 121,058 |
| Treasury stock | -89 | -89 |
| Other equity | -1,065 | 2,530 |
| 155,479 | 157,837 | |
| Non-current debt | ||
| Non-current financial liabilities | 60,479 | 62,581 |
| Other non-current liabilities | 389 | 222 |
| Provisions for pensions | 3,554 | 3,402 |
| Deferred taxes | 10,653 | 11,035 |
| 75,075 | 77,240 | |
| Current debt | ||
| Current financial liabilities | 10,522 | 10,360 |
| Trade payables | 11,396 | 6,928 |
| Liabilities to associates | 19 | 0 |
| Other liabilities | 8,104 | 8,204 |
| Provisions | 1,034 | 1,031 |
| Income tax liabilities | 2,867 | 2,176 |
| 33,942 | 28,699 | |
| 264,496 | 263,776 |
7
for the period from January 1 to March 31, 2018
| € 000s | 01.01. – 03.31.20181 | 01.01. – 03.31.2017 |
|---|---|---|
| Sales | 41,600 | 49,510 |
| Cost of sales | -30,650 | -33,081 |
| Gross profit | 10,950 | 16,429 |
| Research and development expenses | -1,987 | -1,896 |
| Sales-related expenses | -3,417 | -3,776 |
| General administration expenses | -4,300 | -5,831 |
| Other operating income / expenses | 208 | -243 |
| Earnings before interest and taxes (EBIT) | 1,454 | 4,683 |
| Net financial expenses | 5 | -275 |
| Earnings before taxes (EBT) | 1,459 | 4,408 |
| Current tax expenses | -899 | -1,252 |
| Deferred tax income | 642 | 264 |
| Consolidated net income | 1,202 | 3,420 |
| Items that may be subsequently reclassified to profit or loss: | ||
| Currency translation differences from translation of foreign operations | -1,096 | 423 |
| Changes in value of financial investments | -2,499 | 301 |
| Comprehensive income | -2,393 | 4,144 |
| Basic earnings per share in € | 0.10 | 0.29 |
| No. of shares used as basis (basic) | 11,915,950 | 11,854,305 |
| Diluted earnings per share in € | 0.10 | 0.29 |
| No. of shares used as basis (diluted) | 12,019,162 | 11,931,139 |
9
| € 000s | 01.01. – 03.31.20181 | 01.01. – 03.31.2017 |
|---|---|---|
| Operations | ||
| Consolidated net income (after taxes) | 1,202 | 3,420 |
| Depreciation and amortization | 4,441 | 3,780 |
| Current income tax expenses | 899 | 1,252 |
| Income taxes paid less income taxes received | -700 | -302 |
| Financial income | -2 | -1 |
| Financial expenses | 149 | 266 |
| Interest paid | -174 | -120 |
| Interest received | 0 | 2 |
| Other non-cash expenses | 416 | 444 |
| Other non-cash income | -1,334 | -250 |
| Change in net pension provisions through profit or loss | 164 | 30 |
| Change in deferred taxes through profit or loss | -642 | -264 |
| - Profit/+ loss on disposals of non-current assets | -6 | 0 |
| - Increase /+ reduction in inventories, trade receivables, and other assets |
3,359 | 1,885 |
| + Increase /- reduction in trade payables and other liabilities | 4,225 | 3,654 |
| Cash flow from operating activities | 11,997 | 13,795 |
| Investments | ||
| Incoming payments from disposals of non-current assets • Financial assets |
0 | 1 |
| Outgoing payments for investments in non-current assets • Intangible assets • Property, plant and equipment |
-2,112 -1,856 |
-836 -2,133 |
| Cash flow from investing activities | -3,968 | -2,968 |
| Financing | ||
| Incoming funds from taking up of financial liabilities | 0 | 24,500 |
| Outgoing payments for repayment of financial liabilities | -1,118 | -32,777 |
| Cash flow from financing activities | -1,118 | -8,277 |
| Cash-effective change in cash and cash equivalents | 6,911 | 2,549 |
| Cash and cash equivalents at start of period | 24,137 | 26,500 |
| Impact of exchange rate movements | -450 | 81 |
| Cash and cash equivalents at end of period | 30,598 | 29,130 |
Subject to amendment.
Quarterly statements and half-yearly financial reports are neither audited nor subject to an audit review by the group auditor Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Stuttgart.
STRATEC Biomedical AG (www.stratec.com) designs and manufactures fully automated analyzer systems for its partners in the fields of clinical diagnostics and biotechnology. Furthermore, the company offers sample preparation solutions, integrated laboratory software, and complex consumables for diagnostic and medical applications. STRATEC covers the entire value chain – from development to design and production through to quality assurance.
The partners market the systems, software and consumables, in general together with their own reagents, as system solutions to laboratories, blood banks and research institutes around the world. STRATEC develops its products on the basis of its own patented technologies.
Shares in the company (ISIN: DE000STRA555) are traded in the Prime Standard segment of the Frankfurt Stock Exchange.
Published by
STRATEC Biomedical AG Gewerbestr. 37 75217 Birkenfeld Germany Phone: +49 7082 7916-0 Fax: +49 7082 7916-999 [email protected] www.stratec.com
Head of Investor Relations & Corporate Communications Jan Keppeler Phone: +49 7082 7916-6515 Fax: +49 7082 7916-9190 [email protected]
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