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Probi — Interim / Quarterly Report 2018
Nov 1, 2018
3099_10-q_2018-11-01_4760ee03-9fe8-4c5b-94ea-44ee8b4bf2ca.pdf
Interim / Quarterly Report
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Interim report
January-September 2018
Probi delivers strong operating performance and appoints new CEO
Highlights and significant events in the third quarter
- Q3 net sales increase to MSEK 169, up 26% or MSEK 35 quarter-on-quarter, driven by improved commercial execution and recovery from a customer destocking program
- Probi appoints Tom Rönnlund as new CEO, starting end of 2018, and implements a new, customer-centric organizational structure
- Partial early redemption of bank borrowings for a total amount of MSEK 57, reflecting the strength of Probi's balance sheet, improved margins and cash flows
Financial overview
| Full-year | |||
|---|---|---|---|
| MSEK | 9M 2018 | 9M 2017 | 2017 |
| Net sales | 441.3 | 492.9 | 612.2 |
| Net sales growth, constant currency, % | -10.3% | 95.3% | 38.2% |
| Gross margin, % | 45.8% | 46.4% | 45.4% |
| EBITDA | 110.8 | 136.5 | 157.3 |
| EBITDA margin, % | 25.1% | 27.7% | 25.7% |
| Operating profit (EBIT) | 70.5 | 96.4 | 104.1 |
| Net income | 52.4 | 68.1 | 69.1 |
| Earnings per share before and after dilution, SEK | 4.60 | 5.98 | 6.06 |
| Share price on closing day, SEK | 413.60 | 350.00 | 340.00 |
| Market cap on closing day | 4,712.6 | 3,987.9 | 3,874.0 |
See note 5 for definitions of ratios not defined according to IFRS
Invitation to Teleconference Contacts
Time: 10:00 a.m. Phone: +46 8 56 64 26 64 Participants from Probi: Jörn Andreas, CFO
Date: November 1, 2018 Ole Søgaard Andersen, CEO: Phone: +46 46 286 89 40 E-mail: [email protected] Jörn Andreas, CFO: Phone: +46 46 286 89 41 E-mail: [email protected]
The presentation is available at www.probi.com and www.financialhearings.com
About Probi Probi AB is a Swedish publicly traded
bioengineering company. The vision of Probi is to help people live healthier lives by delivering effective and well-documented probiotics, with proven health benefits based on scientific research.
Founded by scientists in Sweden in 1991, Probi is a multinational company with four sites, active in more than 40 markets around the world and holding over 400 patents worldwide. In 2017, Probi had net sales of MSEK 612. The Probi share is listed on Nasdaq Stockholm, Mid Cap. Probi has about 5,000 shareholders.
probi.com
This information is information that Probi AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 8:00 a.m. CET on November 1, 2018. This a translation of the Swedish version of the interim report. When in doubt, the Swedish wording prevails.
CEO Comments
Delivered our target of organic net sales growth and margin improvement
Probi had a favorable third quarter with double-digit growth in several key metrics, including net sales, EBITDA and operating cash flow. We are pleased that, in line with our expectations from the beginning of the year, we returned to quarter-on-quarter organic growth in the second half of the year, with a healthy margin improvement. Probi generated third-quarter net sales of MSEK 169, up 26% on a currency-neutral basis, and a profit margin (EBITDA) of 30%.
Building the foundation for the next level of innovation and growth
While we continued to focus on operational execution, we also achieved important milestones that were set to transition Probi into the next phase of company growth. We were delighted to announce the appointment of Tom Rönnlund as Probi's new CEO. He will assume his position by the end of 2018 and continue to drive the above market growth and strategies to build share in key global markets. In parallel, we announced a new organizational structure that is a natural evolution of our global business and geared even more strongly towards our customers. During the quarter, Probi took additional important steps in preparing for future growth. We made a partial early repayment of our bank borrowings and initiated a process to update our medium-term R&D strategy and clinical trial program.
The third-quarter results reflect our ability to drive growth and build market share. I am convinced that we will reach the next stage of long-term growth by continuing to focus on optimized execution, and on investments in science to strengthen our position as an innovative leader in our industry.
Ole Søgaard Andersen, CEO
Probi's customers
Probi offers probiotic expertise and partnership all the way from R&D to finished products for companies within the consumer healthcare and food industry. Probi manufacturing is GMP-certified and produces proven and effective probiotics in custom made formats with value-adding delivery technologies.
Key Developments in the Group
Probi operates in a fast-paced global market with constantly changing consumer demands, requiring innovation, customer intimacy and agility. With the aim of creating conditions for improved commercial execution and reduced time-to-market for new product developments, Probi implemented a new global organization during the quarter. This new structure will transition the company to a customer-centric organization.
After the end of the quarter, Probi also announced the appointment of Tom Rönnlund as new CEO. Tom currently serves as CEO of the Norwegian listed company Navamedic ASA, and will assume his position as CEO of Probi by the end of 2018. Rönnlund has more than 20 years of experience in sales, marketing, and general management positions in the healthcare industry, and in driving profitable growth through geographical expansion and new partnerships models.
Amplifying Probi's growth potential in the fast-growing Asian market has been a strategic focus for Probi during 2018. To build market share and presence in this region, Probi has expanded its sales organization with additional resources in Singapore and China, and introduced new product formats to meet specific local consumer preferences. In September, Probi participated in the Vitafoods Asia event for the first time, and met a large number of potential customers with a strong interest in Probi's offering.
During the first nine months, sales in the APAC region rose 30% year-on-year. This was mainly due to a major player in the Australian market launching Probi's gastro and immune concept both in Australia and through cross-border e-commerce into China. Probi now has several customers and leads engaged in this fast-growing cross-border e-commerce, including one company that has launched two Probi products under a new Scandinavian brand in China.
North America has been Probi's largest market in recent years, and business development to diversify both customer and product portfolios is continually ongoing. The third quarter saw a large number of new customers, but also existing customers, launch new Probi products. The Multi-Level Marketing segment is developing well as new distributors are engaged and existing distributors expand their geographical reach. In line with the strong market trend towards better documented probiotic products, the SelectTM strains introduced by Probi last year are increasingly gaining customer attention. The number of products launched with SelectTM strains, both as bulk and consumer packaging, is now increasing. Probi Select™ comprises three of Probi's existing immune and digestive health probiotic platforms supported by clinical documentation.
Business development in the EMEA region during the third quarter included preparations for launches of Probi's products in two major European markets as part of activities to diversify the customer portfolio. Probi has also seen a growing interest from customers in several markets to introduce new probiotic beverages in product categories beyond fruit drinks, and test launches are now being planned.
At the end of the third quarter, Probi proceeded with the partial early redemption of its borrowings in an amount of MSEK 57, demonstrating the company's strong balance sheet and free cash flow generation. Since the beginning of the year, Probi has reduced its net debt by MSEK 72, while simultaneously supporting strategic initiatives and retaining the capacity to invest in the future.
Research and Development
The ongoing multi-trial clinical study program progresses according to plan and more results supporting existing and new product launches are expected as studies will be completed in the coming years. Additionally, Probi is investing in its portfolio of discovery initiatives aimed at frontline research to identify new and interesting development opportunities and to secure the company's future competitiveness through collaboration with internationally renowned academic research teams.
In the third quarter, the Probi discovery research collaboration with Dr. Karen Scott of the Rowett Institute, University of Aberdeen, achieved its second milestone by identifying a shortlist of promising strains for further development. The aim of the collaboration is to isolate and characterize completely new bacterial strains, meaning microorganisms that have not previously been used in consumer products, but that may prove useful for next-generation probiotic products.
Under its discovery platform, Probi also explores new health areas and expands its clinical program through investigator-initiated studies, such as in collaboration with the Industrial Research Center for Personalized Medicine in Diabetes at Lund University. Two studies with Probi's strains were initiated during the third quarter. The first study, PreCiSe (Prevention of Celiac disease in Skåne), is the follow-up study to CiPP (Celiac disease Prevention with Probiotics), which has previously been reported by Probi. PreCiSe aims to investigate the impact of being on a gluten-free diet for the first three years of life, compared with a daily intake of a probiotic supplementation or placebo on the risk of developing celiac disease in genetically susceptible children. Approximately 600 children will be recruited for the study. The probiotic product to be evaluated in the study contains two Probi strains, one Lactobacillus plantarum and one Lactobacillus paracasei, which is the same combination of strains applied in CiPP.
The second study is a multicenter clinical study to evaluate the efficacy of a combination of two Lactobacillus plantarum strains in preventing acute graft versus host disease in children and adolescents undergoing donor stem cell transplant. The safety of the two Lactobacillus plantarum strains in this specific pediatric population has already been confirmed (Ladas 2015). The recruitment of study participants was successfully initiated during the third quarter of 2018, and the aim is to recruit approximately 500 children. Both trials have long timelines and the results are expected by 2023 at the earliest.
In the third quarter, Probi attended an important scientific conference to present and exchange on its industry-leading research results. The clinical study on the efficacy of Probi® Osteo to reduce bone loss at the lumbar spine in a population of post-menopausal women was presented at the Annual Meeting of the American Society for Bone and Mineral Research at Montreal, Canada. In addition, the mechanism studies performed on LP299V® and increased iron absorption (FerroSorb®) were presented at the Bioavailability 2018 conference – Understanding the bioavailability of micronutrients and bioactive compounds for improved public health – held in Norwich, UK, in September. The data and models used triggered a significant interest among academic and clinical leaders in the field.
Sales Development
Current Quarter
In the third quarter of 2018, Probi's net sales amounted to MSEK 168.8 (133.5), representing a year-onyear increase of MSEK 35.3, or 26%. Based on constant exchange rates from the preceding year, net sales for the third quarter were MSEK 35.2 higher, corresponding to a year-on-year increase of 26%.
Year-to-Date
During the first nine months of the year, Probi's net sales amounted to MSEK 441.3 (492.9). The overall decrease was MSEK 51.6, or 10% year-on-year. Based on exchange rates from the preceding year, net sales for the first nine months were MSEK 50.6 lower, corresponding to a net sales decline of 10% year-onyear. In the first nine months of 2018, net sales were negatively impacted by MSEK 48.9 due to destocking by one of Probi's largest customers in North America.
Net Sales by Segment
Probi's operating activities are structured in two business segments, each with their own operational management: Consumer Healthcare (CHC) and Functional Food (FF). The Consumer Healthcare segment develops, manufactures and markets Probi's probiotics to pharmaceutical companies and other companies specialized in probiotics and self-care products. Revenue is derived from the sale of goods in bulk and consumer packaging. The Functional Food segment develops food containing Probi's probiotics in partnership with leading food companies. Revenue mainly comprises royalties from partner-generated sales. No business transactions are conducted between the two segments.
| 9M 2018 | 9M 2017 | |||||
|---|---|---|---|---|---|---|
| KSEK | CHC | FF | Total | CHC | FF | Total |
| Net sales | 412,866 | 28,401 | 441,267 | 466,660 | 26,228 | 492,888 |
| Operating expenses | -352,446 | -18,279 | -370,725 | -378,467 | -17,977 | -396,444 |
| Operating profit (EBIT) | 60,420 | 10,122 | 70,542 | 88,193 | 8,251 | 96,444 |
| Financial net | — | — | -2,867 | — | — | -10,496 |
| Earnings before income taxes | — | — | 67,675 | — | — | 85,948 |
Net sales in Consumer Healthcare fell MSEK 53.8 to MSEK 412.9 (466.7). The sales decline in Consumer Healthcare during the nine months of 2018 was largely attributable to the destocking effect mentioned above, as well as a slow start to the year in North America. Additionally, sales in Europe decreased yearon-year due to soft demand following positive market-launch effects in the preceding year.
Net sales in Functional Food totaled MSEK 28.4 (26.2). Sales in the business segment benefitted from favorable underlying volume growth and constant royalty levels in Sweden, as well as continued progress by the Functional Food business segment in North America and APAC.
Net Sales by Region
| KSEK | M9 2018 | M9 2017 | Full-year 2017 |
|---|---|---|---|
| Sweden | 41,991 | 40,390 | 53,818 |
| EMEA, excluding Sweden | 27,275 | 32,582 | 37,961 |
| Americas | 324,711 | 383,467 | 478,979 |
| APAC | 47,290 | 36,449 | 41,486 |
| Total | 441,267 | 492,888 | 612,244 |
During the first nine months of 2018, the Americas accounted for 74% of Probi's net sales. Sales in the region declined MSEK 58.8, or 15%, due to destocking by one of Probi's largest customers and weak demand at the beginning of the year. APAC accounted for Probi's strongest sales growth with a year-onyear increase of 30%, or MSEK 10.8. This trend was mainly attributable to strong growth by new and existing customers in China, Australia and India. Sales in EMEA (excl. Sweden) declined 16% year-on-year to MSEK 27.3. In Europe, sales decreased primarily due to launch delays and start-up difficulties from a major customer agreement signed in 2016. The 4% increase in Sweden was attributable to positive growth for both of our key customers in the Consumer Healthcare and Functional Food business segments.
Earnings
Operating Profit
During the first nine months of 2018, operating expenses totaled MSEK 370.7 (396.4). Cost of goods sold amounted to MSEK 239.0 (264.0), down 9%, due to lower sales activity and corresponding lower capacity utilization in production. Compared with the first nine months of 2017, the gross margin remained nearly constant at 46% (46) of net sales. Sales and marketing expenses of MSEK 63.5 (60.5) increased in line with expanded commercial activities in both the Americas and Asia-Pacific. Administrative as well as research and development expenses remained largely unchanged compared with the first nine months of 2017, and amounted to MSEK 43.4 (45.5), and MSEK 26.1 (27.7), respectively.
In the Consumer Healthcare business segment, operating profit for the first nine months totaled MSEK 60.4 (88.2), down 32%, corresponding to an operating profit/EBIT margin of 15%. Operating profit for the Functional Food business segment totaled MSEK 10.1 (8.3), corresponding to an operating profit/EBIT margin of 36%. The lower operating profit in Consumer Healthcare was mainly due to missing coverage for the fixed costs attributable to a sales decline from the destocking.
Consolidated operating profit (EBIT) for the first nine months of 2018 totaled MSEK 70.5 (96.4). Adjusted for currency effects, operating profit (EBIT) totaled MSEK 70.6. Operating profit was charged with an amount of MSEK 2.3 (-) for personnel-related provisions.
Financial Results
The financial results for the first nine months of 2018 totaled MSEK -2.9 (-10.5). Interest result of MSEK -4.5 (-4.2) was charged to earnings, which remained largely unchanged year-on-year.
Exchange gains and losses incurred due to currency translation of the loan, or fair value changes and realization of forward contracts, are recognized in the exchange result from financing activities. Profit of MSEK 1.7 (loss: 5.9) arose during the reporting period.
Profit after Tax
Profit after tax for the first nine months of 2018 totaled MSEK 52.4 (68.1). Tax expense was MSEK 15.3 (17.8).
Earnings per Share
Earnings per share for the first nine months of 2018 were SEK 4.60 (5.98).
Cash Flow and Financial Position
Capital Expenditure
During the first nine months of 2018, investments in intangible assets amounted to MSEK 8.2 (14.1), of which MSEK 2.2 (2.4) pertained to patents and MSEK 6.0 (11.7) to capitalized development expenditure. Capitalized development expenditure for the first nine months was mainly related to clinical trials in immune function and nutrient absorption. Investments in tangible assets amounted to MSEK 2.8 (6.4).
Change in Cash and Cash Equivalents
Year-to-date, cash and cash equivalents rose MSEK 27.4 (39.8) to MSEK 182.9 (142.9). This includes a partial early redemption of bank borrowings of MSEK 57.2 (32.1), which was recognized in cash flow from financing activities. Cash flow from operating activities declined MSEK 25.5 year-on-year, mainly due to the sales decline, while the third quarter showed an increase of MSEK 22.6.
Employees
At the end of the period, Probi had 160 (196) employees, of whom 79 (91) were women and 81 (105) men. The average number of employees during the first nine months of 2018 was 162 (196).
Related-party Transactions
During the period, Probi's largest owner, Symrise AG, was invoiced KSEK 45.4 (-) and Probi received invoices of KSEK 246.8 (15.4) from Symrise AG. Board member Scott Bush invoiced fees of KSEK 134.2 (139.3) pertaining to project-related consulting services via Probiotic Consulting LLC. The purchase and sale of goods and services to and from related parties is conducted on normal commercial terms. No other related-party transactions occurred during the reporting period.
Significant Risks and Uncertainties
The risks and uncertainties to which Probi's operations are exposed are described on pages 47-48 of the printed version of the 2017 Annual Report. At September 30, 2018, no significant changes were considered to have occurred in these risks or uncertainties.
Parent Company
Parent Company operating revenue decreased to MSEK 212.0 (271.0). Net income in the first nine months was MSEK 43.8 (73.1). Year-to-date, Parent Company investments in tangible and intangible assets amounted to MSEK 8.3 (16.1). For all other aspects, please refer to information for the Group.
Financial Calendar
Year-end report 2018 13 February 2019 Interim Report Q1 2019 29 April 2019 Annual General Meeting 2018 7 May 2019 Interim Report Q2 2019 25 July 2019 Interim Report Q3 2019 28 October 2019 Year-end report 2019 11 February 2020
Annual General Meeting
The 2018 Annual General Meeting will be held in Lund on Tuesday, May 7, 2019 at 3:00 p.m. The venue is to be announced. Shareholders who wish to have matters considered at the AGM are requested to notify the Chairman of the Board by Friday, March 1, 2019. Such proposals should be e-mailed to [email protected] or posted to: Annual General Meeting, Probi AB, c/o Bolagsstämma, Ideon Gamma 1, SE-223 70 Lund, Sweden.
Shareholders who would like to contact the Nomination Committee may do so by e-mailing [email protected] or by letter addressed to Probi AB, c/o Nomination Committee, Ideon Gamma 1, SE-223 70 Lund, Sweden.
Assurance by the Board of Directors
The Board of Directors and the CEO certify that this interim report gives a true and fair view of the Parent Company's and the Group's operations, financial position and results, and describes the risks and uncertainties faced by the Parent Company and the Group.
Lund, November 1, 2018
Jean-Yves Parisot Anna Malm Bernsten Chairman of the Board Board member
Irène Corthésy Malnoë Jan Nilsson Board member Board member
Board member CEO
Scott Bush Charlotte Hansson Board member Board member
Jonny Olsson Ole Søgaard Andersen
The interim report has not been audited.
Consolidated Statement of Comprehensive Income
| KSEK | Notes | Q3 2018 | Q3 2017 | 9M 2018 | 9M 2017 |
|---|---|---|---|---|---|
| Net sales | 2 | 168,822 | 133,501 | 441,267 | 492,888 |
| Cost of goods sold | 3 | -88,697 | -77,083 | -238,981 | -263,958 |
| Gross profit | 80,125 | 56,418 | 202,286 | 228,930 | |
| Sales and marketing expenses | -21,780 | -19,467 | -63,547 | -60,523 | |
| Research and development expenses | -8,181 | -6,797 | -26,085 | -27,674 | |
| Administration expenses | -12,540 | -14,640 | -43,417 | -45,491 | |
| Other operating income | 304 | 1,118 | 1,305 | 1,202 | |
| Operating Profit/EBIT | 37,928 | 16,632 | 70,542 | 96,444 | |
| Financial income | 422 | 112 | 962 | 212 | |
| Financial expenses | -1,950 | -1,650 | -5,563 | -4,846 | |
| Exchange result financing activities | 4 | -210 | -4,396 | 1,734 | -5,862 |
| Financial result | -1,738 | -5,934 | -2,867 | -10,496 | |
| Earnings before income taxes | 36,190 | 10,698 | 67,675 | 85,948 | |
| Income taxes | -8,087 | -1,888 | -15,310 | -17,817 | |
| Net income | 28,103 | 8,810 | 52,365 | 68,131 | |
| Other comprehensive income | |||||
| Components to be reclassified to net income | |||||
| Exchange rate differences resulting from the translation of foreign operations | -7,846 | -29,429 | 55,359 | -74,985 | |
| Cash flow hedge (currency hedges) | 645 | -1,056 | -225 | 349 | |
| Income taxes payable on these components | -142 | 232 | 49 | -143 | |
| Sum of other comprehensive income | -7,343 | -30,253 | 55,183 | -74,779 | |
| Total comprehensive income | 20,760 | -21,443 | 107,548 | -6,648 | |
| Number of outstanding shares at end of the reporting period | 11,394,125 | 11,394,125 | 11,394,125 | 11,394,125 | |
| Average number of shares | 11,394,125 | 11,394,125 | 11,394,125 | 11,394,125 | |
| Earnings per share before and after dilution | 2.47 | 0.77 | 4.60 | 5.98 |
Net income and total comprehensive income are attributable in their entirety to Parent Company shareholders. Since the company has no outstanding convertible debt or outstanding warrants, no dilution effect arose.
In 2011, Probi bought back company shares and at the end of the reporting period owned 250,000 treasury shares, corresponding to 2.1% of the total number of shares, with a quotient value of SEK 5.00 per share.
Condensed Consolidated Statement of Financial Position
| KSEK | 30 September 2018 | 31 December 2017 |
|---|---|---|
| Capitalised Development Cost | 43,981 | 41,045 |
| Customer base | 313,257 | 307,946 |
| Technology and other intangible assets | 139,871 | 138,993 |
| Goodwill | 300,735 | 279,706 |
| Property, plant and equipment | 30,372 | 34,389 |
| Deferred tax assets | 2,333 | 4,620 |
| Non-current assets | 830,549 | 806,699 |
| Inventories | 75,295 | 69,140 |
| Trade receivables | 84,932 | 59,344 |
| Other assets and receivables | 18,636 | 20,003 |
| Cash and cash equivalents | 182,924 | 155,547 |
| Current assets | 361,787 | 304,034 |
| Total assets | 1,192,336 | 1,110,733 |
| Total equity | 992,284 | 884,735 |
| Other non-current liabilities | 6,541 | 5,781 |
| Non-current liabilities | 6,541 | 5,781 |
| Borrowings | 131,326 | 175,913 |
| Trade payables | 30,870 | 27,042 |
| Other current liabilities | 31,315 | 17,262 |
| Current liabilities | 193,511 | 220,217 |
| Total liabilities | 200,052 | 225,998 |
| Liabilities and equity | 1,192,336 | 1,110,733 |
| KSEK | Share capital |
Other contributions received |
Cumulative translation differences |
Other reserves |
Accumulated profit |
Total equity |
|---|---|---|---|---|---|---|
| Opening balance, 1 January 2017 | 58,221 | 600,205 | 21,387 | 299 | 211,955 | 892,067 |
| Net income | — | — | — | — | 68,131 | 68,131 |
| Other comprehensive income | — | — | -74,985 | 207 | — | -74,778 |
| Total Comprehensive Income | — | — | -74,985 | 207 | 68,131 | -6,647 |
| Dividends | — | — | — | — | -11,394 | -11,394 |
| Total transactions with shareholders | — | — | — | — | -11,394 | -11,394 |
| Closing balance, 30 September 2017 | 58,221 | 600,205 | -53,598 | 506 | 268,692 | 874,026 |
| KSEK | Share capital |
Other contributions received |
Cumulative translation differences |
Other reserves |
Accumulated profit |
Total equity |
| Opening balance, 1 January 2018 | 58,221 | 600,205 | -43,073 | -271 | 269,653 | 884,735 |
| Net income | — | — | — | — | 52,365 | 52,365 |
| Other comprehensive income | — | — | 55,360 | -176 | — | 55,184 |
| Total Comprehensive Income | — | — | 55,360 | -176 | 52,365 | 107,549 |
| Closing balance, 30 September 2018 | 58,221 | 600,205 | 12,287 | -447 | 322,018 | 992,284 |
Consolidated Changes in Equity
Consolidated Statement of Cash Flows
| KSEK | 9M 2018 | 9M 2017 |
|---|---|---|
| Net income | 52,365 | 68,131 |
| Adjustments to reconcile net income to cash provided from operating activities | ||
| Income taxes | 15,310 | 17,817 |
| Interest result | 4,452 | 4,152 |
| Amortisation, depreciation and impairment of non-current assets | 40,212 | 40,071 |
| Other non-cash expenses and income | 5,507 | 26,241 |
| Cash flow before working capital changes | 117,846 | 156,412 |
| Change in trade receivables and other current assets | -15,153 | 23,047 |
| Change in inventories | -1,365 | -7,710 |
| Change in trade payables and other current liabilities | 16,903 | -21,968 |
| Income taxes paid | -20,005 | -26,062 |
| Cash flow from operating activities | 98,226 | 123,719 |
| Payments for investing in intangible assets | -8,159 | -14,135 |
| Payments for investing in property, plant and equipment | -2,803 | -6,381 |
| Cash flow from investing activities | -10,962 | -20,516 |
| Interest paid | -5,009 | -3,957 |
| Interest received | 962 | 212 |
| Redemption of bank borrowings | -57,200 | -32,063 |
| Dividends paid | — | -11,394 |
| Cash flow from financing activities | -61,247 | -47,202 |
| Net change in cash and cash equivalents | 26,017 | 56,001 |
| Effects of changes in exchange rates | 1,360 | -16,243 |
| Total changes | 27,377 | 39,758 |
| Cash and cash equivalents as of 1 January | 155,547 | 103,136 |
| Cash and cash equivalents as of 30 September | 182,924 | 142,894 |
Condensed Parent Company Financial Statements
| KSEK | Q3 2018 | Q3 2017 | 9M 2018 | 9M 2017 |
|---|---|---|---|---|
| Operating revenue | 90,477 | 66,334 | 212,014 | 270,980 |
| Operating costs | -30,904 | -23,150 | -69,384 | -90,380 |
| Gross profit | 59,573 | 43,184 | 142,630 | 180,600 |
| Operating profit/EBIT | 30,715 | 18,397 | 54,342 | 96,696 |
| Result from financial income and expenses | -191 | -4,415 | 2,085 | -2,832 |
| Income before tax | 30,524 | 13,981 | 56,427 | 93,863 |
| Net income | 23,764 | 10,888 | 43,769 | 73,124 |
| Other comprehensive income | ||||
| Other comprehensive income | 502 | -824 | -176 | 206 |
| Sum of other comprehensive income | 502 | -824 | -176 | 206 |
| Total comprehensive income | 24,266 | 10,064 | 43,593 | 73,330 |
| 30 September | 31 December | |||
| KSEK | 2018 | 2017 | ||
| Fixed assets | 968,668 | 1,011,899 | ||
| Current assets | 187,836 | 140,015 | ||
| Total assets | 1,156,504 | 1,151,914 | ||
| Equity | 984,548 | 940,955 | ||
| Untaxed reserves | — | — | ||
| Total long-term liabilities | 4,036 | 4,036 | ||
| Current liabilities | 167,920 | 206,923 | ||
| Total equity and liabilities | 1,156,504 | 1,151,914 |
Notes
1. Accounting and Measurement Policies
Group
This interim report has been prepared in accordance with IAS 34 Interim Reporting and the Swedish Annual Accounts Act. The condensed financial statements in the interim report encompass pages 10-17. Disclosures according to IAS 34 Interim Financial Reporting are provided both here and elsewhere in the interim report. The ESMA Guidelines on Alternative Performance Measures have been applied.
The accounting policies applied when these consolidated financial statements were prepared are consistent for all presented periods, unless otherwise stated. The complete accounting policies can be found on pages 61-64 of the printed version of the 2017 Annual Report.
IFRS 15 and IFRS 9, effective for fiscal years beginning on or after January 1, 2018, did not have any material impact on the reporting of consolidated income or financial instruments, respectively. For further information, see the 2017 Annual Report, page 61.
IFRS 16 Leases will replace IAS 17 as of January 1, 2019. Operating leases will be recognized in the same way that finance leases are recognized today. Probi has started to prepare for implementation of the new standard and is currently finalizing data gathering and systems readiness for reporting under IFRS 16. Probi has decided to transition to IFRS 16 using the cumulative catch-up approach and will be presenting the impact of the new standard on the presentation of its financial position and operating results in its 2018 Annual Report.
The Parent Company's functional currency is the Swedish krona (SEK), which is also the reporting currency of both the Parent Company and the Group. All amounts stated have been rounded off to the nearest thousand SEK, unless otherwise stated.
Amounts and figures in parentheses pertain to comparative figures for the year-earlier period. Amounts are stated in Swedish kronor (SEK), thousands of Swedish kronor (KSEK) or millions of Swedish kronor (MSEK) according to that which is stated.
Parent Company
The Parent Company applies the same accounting policies as the Group, with the exceptions and additions stated in RFR 2 Accounting for legal entities – January 2018. This interim report complies with the Swedish Annual Accounts Act.
2. Net sales from contracts with customers
The disaggregation of the Group's net sales from contracts with customers is set out below:
| 9M 2018 | 9M 2017 | |||||
|---|---|---|---|---|---|---|
| KSEK | CHC | FF | Total | CHC | FF | Total |
| Type of goods or service | ||||||
| Goods | 409,192 | 2,790 | 411,982 | 456,851 | 1,886 | 458,737 |
| Royalty, licences, etc. | 3,674 | 25,611 | 29,285 | 9,809 | 24,342 | 34,151 |
| Total net sales from contracts with customers | 412,866 | 28,401 | 441,267 | 466,660 | 26,228 | 492,888 |
| Geographical markets | ||||||
| Sweden | 20,583 | 21,408 | 41,991 | 19,948 | 20,442 | 40,390 |
| EMEA, excluding Sweden | 27,257 | 18 | 27,275 | 32,582 | — | 32,582 |
| Americas | 319,391 | 5,320 | 324,711 | 378,402 | 5,065 | 383,467 |
| APAC | 45,635 | 1,655 | 47,290 | 35,728 | 721 | 36,449 |
| Total net sales from contracts with customers | 412,866 | 28,401 | 441,267 | 466,660 | 26,228 | 492,888 |
3. Currency translation from operating activities
The following table shows the exchange result from operating activities recorded within cost of goods sold:
| KSEK | Q3 2018 | Q3 2017 | 9M 2018 | 9M 2017 |
|---|---|---|---|---|
| Exchange gains operating activities | 1,707 | 5,303 | 6,377 | 11,883 |
| Exchange losses operating activities | -1,965 | -6,091 | -3,968 | -14,130 |
| Exchange result operating activities | -258 | -788 | 2,409 | -2,247 |
4. Currency translation from financing activities
The following table shows the exchange result from financing activities recorded within exchange result financing activities:
| KSEK | Q3 2018 | Q3 2017 | 9M 2018 | 9M 2017 |
|---|---|---|---|---|
| Exchange gains financing activities | -18,612 | 13,884 | 16,360 | 75,174 |
| Exchange losses financing activities | 18,402 | -18,280 | -14,626 | -81,036 |
| Exchange result financing activities | -210 | -4,396 | 1,734 | -5,862 |
5. Definition of alternative performance measures not defined by IFRS
The company presents some alternative performance measures (APMs) in the interim report that are not defined by IFRS. The company believes that these measures provide valuable supplementary information to investors and company management. Since not all companies calculate alternative performance measures in the same way, these measures are not always comparable with those used by other companies. However, the measures should not be considered a substitute for the financial measures required under IFRS.
The following APMs are presented in the interim report:
Operating Profit/EBIT
Operating Profit/EBIT is defined as net income before financial income and expenses and tax for the period.
| KSEK | Q3 2018 | Q3 2017 | 9M 2018 | 9M 2017 |
|---|---|---|---|---|
| Net income | 28,104 | 8,810 | 52,365 | 68,131 |
| Income taxes | 8,087 | 1,888 | 15,310 | 17,817 |
| Financial result | 1,738 | 5,934 | 2,868 | 10,496 |
| Operating Profit / EBIT | 37,929 | 16,632 | 70,543 | 96,444 |
EBITDA
EBITDA is defined as Operating Profit/EBIT before depreciation, amortization and impairment.
| KSEK | Q3 2018 | Q3 2017 | 9M 2018 | 9M 2017 |
|---|---|---|---|---|
| Operating Profit / EBIT | 37,928 | 16,632 | 70,542 | 96,444 |
| Depreciation and amortisation | 12,940 | 12,808 | 40,212 | 40,071 |
| EBITDA | 50,868 | 29,440 | 110,754 | 136,515 |
EBIT margin
EBIT margin is defined as EBIT divided by net sales.
EBITDA margin
EBITDA margin is defined as EBITDA divided by net sales.
Gross margin
Gross margin is defined as gross profit divided by net sales.
Market capitalization at closing day
Market capitalization at closing day is defined as the share price at the end of the period multiplied by the number of shares outstanding.
Net sales growth, constant currency
Net sales growth, constant currency, is defined as net sales for the year translated at the preceding year's exchange rates divided by the preceding year's net sales.
Operating expenses
Operating expenses are defined as the sum of costs of goods sold, sales and marketing expenses, research and development expenses, administration expenses, other operating income and other operating expenses.