Sectra — Audit Report / Information 2021

Jun 4, 2021

REPORT PRESENTATION June 2, 2021, at 10:00 am (CEST)

investor.sectra.com/q4report2021

More information on page 14.

Year-end report 2020/2021:

Increased profitability and record-breaking order bookings

Sectra helps customers provide patients with the best possible care and protect society's critical infrastructure and communication where it is the most vulnerable. Although the COVID-19 pandemic has temporarily dampened sales in some markets, demand for Sectra's offering is growing. In 2020/2021, the Group's order bookings increased 46% to a record-breaking SEK 2.7 billion. The fiscal year was also the best to date for Sectra in terms of earnings, and the Group's three financial goals were exceeded. In light of this, it is proposed that the Annual General Meeting (AGM) resolve that SEK 4.50 per share be distributed to the shareholders through a share redemption program. It is also proposed that the Meeting resolve on a share split.

THE PERIOD AND THE QUARTER IN BRIEF

Figures in parentheses pertain to the corresponding period/quarter in the preceding year.

2020/2021 fiscal year

• Order bookings increased 46.0% to SEK 2,651.6 million (1,816.0).
• Net sales declined 1.7% to SEK 1,632.4 million (1,661.1). Based on unadjusted exchange rates, net sales increased 3.4%.
• Operating profit rose 18.6% to SEK 350.1 million (295.3), corresponding to an operating margin of 21.4% (17.8). Based on unadjusted exchange rates, the increase was 32.2%.
• Profit before tax amounted to SEK 348.2 million (303.0).
• Cash flow after changes in working capital increased to SEK 372.2 million (296.3).
• It is proposed that the 2021 AGM resolve on a share split whereby each share, regardless of class, be divided into five shares of the same class.
• The Board and the CEO have proposed that the 2021 AGM resolve that SEK 4.50 per share be transferred to the shareholders through a share redemption program (or SEK 0.90 per share after the completion of the 5:1 share split proposed by the Board for resolution by the AGM; refer to page 13). No ordinary dividend is proposed.

Fourth quarter, February–April 2021

Order bookings amounted to SEK 689.2 million (716.2), down 3.8% from the comparative quarter. Of the order bookings during the quarter, 16.8% were recognized during the quarter and a further estimated 48% to 58% pertains to revenue within 12 months after the end of the quarter.

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• Net sales increased 3.7% to SEK 526.2 million (507.6). Based on unadjusted exchange rates, the increase was 10.4%.
• Operating profit rose 32.6% to SEK 163.9 million (123.6), corresponding to an operating margin of 31.1% (24.3). Based on unadjusted exchange rates, operating profit increased 49.8%.
• Profit before tax amounted to SEK 166.5 million (126.7).
• Cash flow after changes in working capital amounted to SEK 113.7 million (81.0).

Key figures	The quarter			Full-year
SEK million	Q4	Q4	Change	Q1–4	Q1–4	Change
	20/21	19/20	%	20/21	19/20	%
Order bookings	689.2	716.2	-3.8	2,651.6	1,816.0	46.0
Net sales	526.2	507.6	3.7	1,632.4	1,661.1	-1.7
Operating profit (EBIT)	163.9	123.6	32.6	350.1	295.3	18.6
Operating margin, %	31.1	24.3	n/a	21.4	17.8	n/a
Profit before tax (EBT)	166.5	126.7	31.4	348.2	303.0	14.9
Profit margin, %	31.6	25.0	n/a	21.3	18.2	n/a
Profit after tax	132.6	99.2	33.7	275.5	237.4	16.0
Earnings per share before dilution, SEK	3.44	2.58	33.3	7.15	6.18	15.7
Cash flow 1	113.7	81.0	40.3	372.2	296.3	25.6
Cash flow per share before dilution 1	2.95	2.10	40.5	9.66	7.69	25.6
Average no. of employees	857	797	7.5	828	780	6.2

¹ Cash flow from operations after changes in working capital

This information constitutes information that Sectra AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and/or the Swedish Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out in the press release, at 8:15 a.m. CEST on June 2, 2021.

CEO'S COMMENTS

It is difficult to discuss where we stand as a company after the 2020/2021 fiscal year without mentioning the pandemic. Sectra does all it can to contribute to society by helping customers treat patients, cure diseases, and safeguard society from cybercrime. Our results reflect our success in these areas.

We have welcomed new customers and expanded already-existing partnerships, even though our possibilities to visit our customers were drastically limited. New ways of working have been introduced and new functionalities for managing the challenges faced by our customers during the pandemic have been delivered. Some projects were completed remotely, others with masks on and under unusual conditions. We educated, supported, and maintained relationships with our customers. We continued to do our jobs, even though employees in some countries needed to homeschool their children or attend important meetings from home. It was a difficult year for many of our employees. They may have lost a loved one, worked in isolation, or been challenged to accomplish tasks in an entirely new way. But the results we achieved together were motivating and our efforts were incredibly important for many people. I hope that you, the reader, share my appreciation for these often enormously difficult contributions from our employees around the world. The same applies for healthcare personnel, who are everyone's heroes and who continue to help an enormous number of patients who need care.

During difficult circumstances, we are guided by our corporate culture, our core values and our vision. This is an important reason why things have continued to go well for us during the COVID-19 pandemic. We posted record-breaking order bookings for the fiscal year, which shows that our focus on customer satisfaction is paying off, and we exceeded the Group's three financial goals. Our operating margin was well over the target of 15%, which is mainly due to the effect of temporarily lower costs for travel and trade fair events due to pandemic restrictions. We expect these effects to gradually decline as society returns to more normal conditions. However, developments after the COVID-19 pandemic are difficult to predict. Even if customers have increasingly accepted new ways of working remotely, we do not consider this year's level to be sustainable, so the long-term target margin remains unchanged.

The golden rule

We have many strategies to reach our goals but they can essentially be summarized as treating our customers how we would like to be treated if we were in their situation. Do unto others as you would have them to do unto you – the golden rule that we see, in various forms, in essentially all societies and religions. Living and acting according to the golden rule leads to successful teamwork and successful business, plus it makes work more fun and more satisfying for our employees.

I like quotes and have collected quite a few. One of them is "No man is an island." We need to work as a team and I would like to emphasize one of our core values: "Tolerance and respect for each other as individuals and friends." High-performing teams need an environment where everyone feels comfortable asking questions, challenging how things are done and sharing better suggestions and ideas without the fear of social retribution from either the team or their manager. An environment where people feel heard and where everyone can focus on the task at hand, rather than on strategies to promote themselves or avoid being questioned. This kind of trust and individual security comes from showing tolerance and respect for each other.

Medical IT and cybersecurity are growing markets

Our possibilities for growth are strong in all operating areas for the foreseeable future, even if the pandemic results in a temporary decline in demand in certain markets and areas. People still suffer from diseases. And society's need for cybersecurity is still growing. These trends are global, and are driving underlying growth in Sectra's niche areas.

"Our priority has always been our customers, and thus indirectly patients and members of society. Customer satisfaction, in turn, cannot be achieved without motivated and happy employees. If you connect this to long-term strategies in growing markets, where we can grow along with the market, this will ultimately result in a favorable outcome for our shareholders. Shareholder value comes from customer value, which, in turn, is created by motivated employees."

Torbjörn Kronander, President and CEO

Increased productivity, access to new technology and scalability are more important than ever in the situation in which healthcare providers now find themselves. Healthcare is facing large increases in volume owing to the number of examinations that need to be conducted and reviewed once elective (planned) healthcare procedures pick up again after the pandemic. Extensive healthcare consolidation is also happening in many countries and mergers or acquisitions of healthcare providers are leading to a growing need for efficient scaling of systems in pace with increases in volumes.

Altered ways of working during the pandemic have accelerated digitization in society's critical organizations, and it is essential that society's infrastructure, authorities, defense departments and healthcare are protected from cybercrime. Unfortunately, it is common for criminals to exploit a crisis, including the COVID-19 pandemic, which has further increased this need.

Adjustments for growth and rapid transition to cloud services

As in other areas of society, we are seeing a trend of customers choosing solutions where they pay per use or per time period instead of purchasing a license. The transition has taken time, due in part to the healthy conservative nature of customers in our segments. However, acceptance has increased and we expect a much speedier transition in the next few years. In the future, we believe that a majority of our revenue will come from services. These systems will also often be delivered from "the cloud." We are currently adapting our organization, product development and price models to meet the demand for cloud services and to scale our operations efficiently as we grow.

The pandemic has accelerated customer acceptance of our new Sectra One subscription model, which was introduced in North America at the beginning of the fiscal year. Payment and subscription models based on per-use invoicing will enable a more even balance between quarters over the long term, but are not expected to have a major effect over the next few years. We will continue to see significant variations in financial outcomes between quarters. This is due in part to the deployment of comprehensive customer projects and project deliveries, but is also a natural consequence of seasonal variations, since many customers want to go live before the relatively calm summer period. Accordingly, it remains important to look more at trends than at the outcome for an individual quarter when assessing Sectra's development.

Outlook

We have faced major challenges in our operations and have implemented growth initiatives that could eventually become significant. Our initiatives in innovation and further product development are continuing at full speed, only marginally affected by the pandemic. We are proud over what we have achieved and our ability to reach our goals. At the same time, we remain humble. We cannot forget what brought us here:

• Satisfied customers because we act according to the golden rule.
• A strong corporate culture.
• Recruiting, developing and retaining the best employees.
• Choosing growing markets because that is where it's easier to grow.
• Delivering solutions that help solve important problems in society.
• Encouraging joy, innovation, flexibility and the ability to adapt.

Darwin is thought to have said once that it is not the strongest that survive, but the most adaptable. We all need to adapt when our environment changes; we need to develop and change. But adaptations are incredibly difficult to implement through rules and processes. They need to happen at a cultural level – and that is where we excel. Time and time again, we have shown that we are fast when we need to be, with our strong drive to help our customers and solve their problems in new and innovative ways.

Overall, I look forward to a bright future for our customers and therefore ourselves and our shareholders!

Diagrams in the financial report Amounts are restated in SEK million unless otherwise indicated. Bars show the outcome per quarter and lines show the outcome for the rolling 12-month period.

FINANCIAL GOALS

The rolling 12-month performance exceeded the levels for the Group-wide financial goals. Stability and profitability are considered hygiene factors. Once these goals have been met, the focus shifts to our growth goal, where we reinvest Sectra's profit in areas that have the potential to increase customer value and thereby contribute to stable and long-term returns for our shareholders. Goals in order of priority:

EVENTS

Fourth quarter

• Sectra earned five "Best in KLAS" awards for having the highest customer satisfaction in radiology and pathology.
• Region Kronoberg in Sweden switched to Sectra's cloud-based service to improve medical image management.
• Several prominent US healthcare providers ordered Sectra's medical imaging solutions, choosing the new Sectra One subscription model. Agreements were signed with UC San Diego Health, Mary Washington Healthcare and Baylor College of Medicine.
• Sectra signed a five-year medical imaging contract with Emory Healthcare in the US, the largest healthcare system in the state of Georgia.
• Alrijne Zorggroep in the Netherlands will consolidate its image management by expanding its existing system from Sectra.
• Institut Curie, one of France's most renowned and prestigious cancer centers, will digitize its pathology with help from Sectra.
• The Israeli healthcare provider Shaare Zedek Medical Center, one of the largest hospitals in Jerusalem, chose Sectra's pathology solution for full-scale primary diagnostics. The IT solution was sold by Sectra's distribution partner in Israel, Medi-Far Healthcare Solutions.
• In partnership with the Swiss security company Wire, Sectra is offering a new service to protect digital communication for civil authorities and large corporations.
• The European Council approved the Sectra Tiger/S 7401 LTE eavesdrop-proof phone for communication up to the SECRET security level.
• Dutch ministries extended their contract with Sectra for secure communication as a service, referred to by the ministries as VECOM.
• Elisabet Jamal Bergström was appointed to the Nomination Committee to represent SEB Investment Management (refer to page 13).

After the end of the reporting period

There were no events after the balance-sheet date that had a material impact on Sectra's operations.

SECTRA'S MARKETS

We play a key role in meeting the needs of medical imaging IT and cybersecurity—two changing and growing markets with additional scope for expansion, where the underlying societal trends mean these areas must grow. Our customers operate in some of society's most critical functions. Our job is to help customers become more efficient and give them the tools needed to make people's lives healthier, safer and more secure. As stated in Sectra's vision, this is how the company creates value for its customers, shareholders and society as a whole.

IT support for more efficient care and medical education

Today's demographic development and increased survival rates among cancer patients are putting pressure on healthcare. To maintain a high quality of care, the healthcare sector is being forced to accomplish more with the same or fewer resources. The growing population of senior citizens is shining a spotlight on diseases affecting the elderly. The treatment of patients with cancer and skeletal diseases—some of the most costly and resource-intensive areas in the healthcare sector—entails enormous challenges. These areas are dependent on medical diagnostic imaging, a niche market in which healthcare providers across the globe use Sectra's expertise and solutions to increase productivity and coordinate their resources as well as to improve efficiency in orthopaedic surgery through better planning. We also help to raise the quality of medical education by providing solutions for interacting with medical images and sharing educational materials. We enable customers across the world to take care of more patients and save more lives at a long-term sustainable cost. This work is carried out in our Imaging IT Solutions and Business Innovation operating areas.

Sectra has more than 2,000 installations of medical IT systems worldwide, including several of the world's topranked hospitals. High customer satisfaction is an important factor underlying this growing customer base.

Cybersecurity for a more stable and safer society

The ability to safely and efficiently handle and transmit sensitive information is central to the stability and security of society, particularly when it comes to critical social functions and critical infrastructure. The players in these areas rely on products and services that increase cybersecurity, a niche market where we have extensive experience of protecting society's most critical communications and are a strong brand in the area of encryption and secure mobile communications. IT developments in society, political instability in the world, and the growth of cybercrime are creating a greater need for Sectra's expertise and product offerings. We help customers to provide increased security for society's most critical communication and control systems, thereby contributing to a more stable and safer society. This work is carried out in the Secure Communications operating area. We are seeing increasing synergies between our operating areas since healthcare is increasingly subject to cybercrime, resulting in, for example, the authorities in the US issuing a particular warning to healthcare providers.

Effects of the COVID-19 pandemic

The pandemic has affected Sectra's markets. To reduce the spread of COVID-19, many customers have shifted work to employees' home offices. This applies to customers active in the area of healthcare as well as government agencies and defense organizations. Home workspaces place increased demand on data security and require supplementing existing installations with new functions specifically aimed at remote collaboration. For Sectra, this has led to a temporary upswing in demand for some of our solutions. This includes mobile crypto solutions as well as IT systems that permit radiologists and pathologists to review and collaborate around cases remotely, and also for solutions that enable education for medical students to continue remotely when universities close.

At the same time, our customers have prioritized what was absolutely necessary for the moment. In certain cases, this has resulted in the postponement of planned projects or in purchasing departments putting ongoing procurements on hold. Though this has entailed delays, we also have projects that have progressed more rapidly than planned. In addition, the sharp downturn in elective healthcare in certain cases has led to a drastic loss of revenue for customers, primarily in privately run hospitals. This ultimately affects their ability to pay and several healthcare providers have imposed temporary freezes on investments. This has led to increased interest in Sectra One, our new pay-per-use subscription model. The effects of the pandemic are currently smaller in publicly financed markets, but lower tax income may have consequences in a few years.

Despite the great tragedy society is experiencing owing to the pandemic, the long-term changes mean increased need for enhancing efficiency and business development. Both we and our customers are acquiring know-how for new ways of working remotely, and we are seeing new product opportunities. In our opinion, this will lead to changed and more efficient approaches after the COVID-19 pandemic as well.

Regional and national restrictions continue to apply to various extents. Places with stringent restrictions face an increased risk of delivery delays, which could lead to significant variations in financial outcomes between quarters. Overall, the pandemic has promoted greater uncertainty than normal, which means that predicting what effects it will have on Sectra's financial performance going forward will be unusually difficult. Sectra has neither needed nor received any support in the form of reduced rent, furlough assistance or business transition support. No need for impairment is deemed to exist owing to the pandemic. Sectra is relatively well equipped to manage the uncertainty based on a strong financial position, positive cash flows and a significant share of recurring revenue.

COMMENTS ON THE GROUP'S FINANCIAL OUTCOME

Order bookings and net sales

Sectra reported record-high order bookings for 2020/2021. Order bookings rose 46.0% to SEK 2,651.6 million (1,816.0), of which SEK 689.2 million (716.2) pertained to the fourth quarter. This outcome includes several major long-term agreements, which contribute to long-term stability, but also lead to significant variations in order bookings between individual quarters. Our Imaging IT Solutions and Secure Communications operating areas contributed to the growth. Geographically, the operations in Norway, the UK and the US accounted for the largest individual increases compared with the preceding fiscal year. The ratio of order bookings to net sales for the latest rolling 12-month period increased to 1.62, up from 1.09 at the end of the 2019/2020 fiscal year.

Net sales for the fiscal year decreased 1.7% to SEK 1,632.4 million (1,661.1), of which SEK 526.2 million (507.6) pertained to the fourth quarter. Major currency fluctuations (refer to page 19) and limited possibilities to deploy customer projects in certain regions due to pandemic restrictions had an impact on the outcome for the fiscal year. Based on unadjusted exchange rates, net sales increased 3.4%. More than 70% of our net sales are carried out in foreign currency, primarily EUR, GBP and USD, which entails a relatively large sensitivity to currency fluctuations.

Currency fluctuations had the largest negative effect on Imaging IT Solutions, whose outcome based on unadjusted exchange rates increased compared with the preceding fiscal year. Secure Communications continued to report sales growth, while Business Innovation was impacted by the pandemic to a greater degree. Markets with a high share of new sales have been affected by the pandemic restrictions to a greater extent, which entails larger variations between quarters in countries such as the US, the Netherlands and the rest of Europe. Markets where we have a high share of recurring revenue, such as Sweden, have not been affected to the same degree. In the UK, service sales increased but lower revenue from the product group hardware and third-party products had the opposite effect on the outcome.

Sales trend per geographic market Compared with the preceding fiscal year

Earnings

The Group's operating profit increased 18.6% to SEK 350.1 million (295.3), of which SEK 163.9 million (123.6) pertained to the fourth quarter. This corresponds to an operating margin of 21.4% (17.8) for the fiscal year and 31.1% (24.3) for the quarter. Based on unadjusted exchange rates, operating profit increased 32.2% compared with the year-earlier period. Earnings were strengthened by sales with somewhat higher gross margins, but primarily by the fact that operating expenses were lower than in the comparative period. The earnings effect of increased personnel costs was offset by temporarily lower costs for travel and trade fairs due to pandemic restrictions.

The Group's financial items amounted to a negative SEK 1.8 million (pos: 7.7), of which a positive SEK 2.6 million (pos: 3.2) pertained to the fourth quarter. These changes are mainly a result of major currency fluctuations, with the SEK strengthening against the USD and GBP. Currency fluctuations for the fiscal year in cash and cash equivalents had a negative impact of SEK 7.1 million (pos: 3.7) on financial items. Sectra does not hedge its operations, and currency fluctuations therefore have an immediate impact. Profit after financial items amounted to SEK 348.2 million (303.0), of which SEK 166.5 million (126.7) pertained to the fourth quarter. This corresponds to a profit margin of 21.3% (18.2) for the fiscal year and 31.6% (25.0) for the fourth quarter. The main reason for the improved profit margin in the fiscal year is that the negative impact of currency fluctuations was offset by lower operating expenses due to COVID-19 restrictions. Earnings per share totaled SEK 7.15 (6.18) for the period, of which SEK 3.44 (2.58) pertained to the fourth quarter.

Financial position and cash flow

The Group's cash and cash equivalents at the end of the reporting period amounted to SEK 454.9 million (345.3). The Group's debt/equity ratio was 0.08 (0.11) as of the balance-sheet date. Interest-bearing liabilities amounted to SEK 73.5 million (87.4), of which SEK 70.5 million (80.9) pertained to lease liabilities according to IFRS 16 and SEK 2.9 million (6.5) pertained to convertible loans held by employees and Board members.

Cash flow from operations increased to SEK 372.2 million (296.3) for the period, of which SEK 113.7 million (81.0) was attributable to the fourth quarter. The change in the fiscal year was mainly due to increased operating profit and a decrease in tiedup capital. Cash flow per share amounted to SEK 9.66 (7.69) for the period, of which SEK 2.95 (2.10) pertained to the fourth quarter.

Cash flow from investing activities amounted to a negative SEK 66.8 million (neg: 78.5) for the period, of which a negative SEK 20.2 million (neg: 21.1) was attributable to the fourth quarter. Refer to the information about investing activities on page 8.

The Group's total cash flow for the period amounted to SEK 106.7 million (21.2). This result includes a disbursement of SEK 173.3 million (172.6) to the shareholders through the share redemption program during the second quarter. Excluding the share redemption program, total cash flow amounted to SEK 280.0 million (193.8).

Cash flow after changes in working capital, Group

Investments, depreciation/amortization and impairment

Investments for the period amounted to SEK 67.7 million (78.5), of which the fourth quarter accounted for SEK 20.2 million (21.1). Investments for the fiscal year pertained primarily to development costs for medical imaging IT, which have been capitalized. The results for the comparative year include purchasing rights for software and the acquisition of assets in Columbitech AB.

Capitalized work for own use increased 13.4% during the fiscal year to SEK 47.4 million (41.8), of which SEK 12.3 million (12.1) pertained to the fourth quarter. The figures for the fiscal year include capitalized development costs of SEK 47.4 million (36.9), of which SEK 12.3 million (11.5) pertained to the fourth quarter. Increased activity in ongoing development projects was reported mainly in Imaging IT Solutions. Of the total depreciation and amortization for the fiscal year, SEK 31.9 million (28.4) was attributable to capitalized development projects, of which SEK 8.3 million (7.6) pertained to the fourth quarter. At the end of the fiscal year, capitalized development costs totaled SEK 137.7 million (111.0).

Total depreciation, amortization and impairment for the fiscal year amounted to SEK 83.1 million (79.7), of which the fourth quarter accounted for SEK 22.3 million (19.1). Depreciation of right-of-use assets according to IFRS 16 for the fiscal year amounted to SEK 24.6 million (22.0), of which SEK 6.2 million (5.8) pertained to the fourth quarter. Depreciation/amortization amounted to SEK 4.2 million during the fiscal year, of which SEK 2.2 million in the second quarter related to the acquisition of Columbitech in 2019 (refer to page 11) and SEK 2.0 million in the fourth quarter related to the acquisition of RxEye in 2016 (refer to page 9).

Seasonal variations

Sectra has seasonal variations, stemming from many customers wanting to go live before the relatively calm summer period. These seasonal variations entail that most of the company's invoicing and earnings have traditionally been generated at the end of the fiscal year. Over the long term, the new Sectra One subscription model for software licenses will enable more balance between quarters, but it is believed this will not have a major effect over the next few years. The variation in order volumes in individual quarters can also be substantial when customers sign major multiyear agreements with the company, for example, for medical IT projects or encryption systems.

IMAGING IT SOLUTIONS

	The quarter				Full-year
	Q4	Q4	Change	Q1–4	Q1–4	Change
	20/21	19/20	%	20/21	19/20	%
Sales, SEK million	460.1	445.9	3.2	1,397.7	1,428.2	-2.1
Operating profit, SEK million	177.5	131.6	34.9	378.0	317.6	19.0
Operating margin, %	38.6	29.5	n/a	27.0	22.2	n/a

Imaging IT Solutions reported historically high order bookings for 2020/2021, primarily driven by new customer sales of region-wide solutions for major healthcare providers that provide care for millions of patients. During the fiscal year, agreements were signed with new customers such as Amsterdam UMC (the Netherlands), Greater Manchester (the UK) and Helse Sør-Øst RHF (Norway). Specific initiatives are ongoing in the US, where we are strengthening our position through orders from prominent customers such as Michigan Medicine, CHRISTUS Health and UC San Diego Health. Sectra One, our new subscription model, was introduced in North America during the fiscal year and has been well received by customers. While it was mainly Sectra's largest markets that contributed to increased order bookings, we have also been successful in countries such as Belgium, France, Canada, Switzerland and Germany.

Sectra's offering in enterprise imaging supports digital pathology, a quickly growing market where in the most recent quarter we received orders from Baylor College of Medicine in the US and major cancer centers in Israel and France. In 2021, we also deployed our pathology system at Australia's largest skin cancer center, Southern Sun Pathology, which became of the first in the country to apply a digital workflow within clinical pathology. The fact that prominent pathology clinics around the world are choosing Sectra is evidence that we have positioned ourselves as a market leader in this product segment.

The operating area's strong order bookings led to intense pressure when it came to installing and deploying customer projects. Deliveries have largely gone according to plan, but our installation capacity and timing in some countries were affected by pandemic restrictions. This led to major fluctuations between quarters and, together with currency fluctuations, dampened sales during 2020/2021. However, Imaging IT Solutions reported a strong end to the fiscal year, with increased sales and higher operating profit during the fourth quarter, primarily due to deliveries in a number of customer projects. The positive operating margin for the fiscal year was otherwise mainly attributable to temporarily lower operating expenses driven by limitations on travel and trade fair activities due to pandemic restrictions as well as a higher gross margin as a result of lower costs related to purchases of third-party products. The financial outcome for the fourth quarter includes a reversal of a reserve for a contingent consideration amounting to SEK 1.2 million and impairment of customer relationships totaling a negative SEK 2.0 million. These items pertain to the acquisition of RxEye AB, and the impairment was based on the assessment that the acquired service will no longer generate revenue streams from new customers, since new sales are carried out together with other image sharing services from Sectra.

Increased demand for cloud services

More and more customers are demanding cloud services over local installations and deliveries are increasing, primarily in Scandinavia, the UK and the US. Both NSW Health (Australia) and Greater Manchester (the UK), two of Sectra's largest ongoing customer projects, use cloud services. For the last few years, Sectra has been preparing for a transition to service deliveries. All new products that are developed are designed to run efficiently in a cloud environment, and a new organization will be put in place in 2021/2022 to meet the demand for cloud services and to grow through increased scalability and internal efficiency. While cloud services will ultimately generate cost and operational benefits for Sectra, they initially entail cost increases connected to investments, development and the organization.

Awards for the industry's most satisfied customers

Sectra has won the prestigious "Best in KLAS" customer satisfaction award for the eighth consecutive year. The Sectra PACS radiology solution was ranked number one by healthcare providers in three regions: the US (Large PACS and Small PACS), Canada and Europe. Sectra also swept the new award for digital pathology. Read more about Sectra's awards at sectra.com/KLAS.

There is a rapid transition to cloud services under way within healthcare. In Sweden, essentially all new medical imaging procurements require cloud-based service delivery. Region Kronoberg is a new customer for Sectra and one of the healthcare providers that has chosen to use cloud services for image management.

BUSINESS INNOVATION

	The quarter			Full-year
	Q4	Q4	Change	Q1–4	Q1–4	Change
	20/21	19/20	%	20/21	19/20	%
Sales, SEK million	17.4	22.5	-22.7	55.8	78.1	-28.6
Operating profit, SEK million	5.9	8.7	-32.2	0.8	12.9	-93.8
Operating margin, %	33.9	38.7	n/a	1.4	16.5	n/a

Business Innovation is an incubator for early-stage business units, projects and ideas that are not yet large enough to become independent operating areas and are not a natural match with the existing areas. We also report the expenses for our long-term research activities in this area, which currently largely focus on initiatives in the field of AI for medical applications. Within Business Innovation, the Group evaluates and utilizes opportunities to:

• Commercialize new technologies and new segments in the Group's core and related areas.
• Participate in research that can lead to a better quality of life for the individual as well as increased customer value and productivity in the healthcare sector.
• Manage and develop Sectra's patent portfolio.

The segment comprises the smaller Orthopaedics and Medical Education business units as well as the research department. These were included in the Parent Company in 2020/2021. From May 1, 2021, the Orthopaedics and Medical Education business units will be independent legal entities, although they will still be reported in the Business Innovation segment.

The results in Business Innovation's two relatively small business units vary significantly between quarters and periods. We are currently undergoing a product generation shift in both Orthopaedics and Medical Education, with new products that are attracting considerable interest from the market. Nevertheless, sales were palpably affected by the consequences of the pandemic, which among other things has led to a sharp downturn in elective (planned) healthcare. For some customers, particularly private operators within orthopaedics, this has entailed reduced volumes and, consequently, a significant loss of revenue. Nor was an upswing in sales of solutions and services that enable remote medical education sufficient to offset the decline in sales, for example in Asia and South America, caused by the pandemic. At the same time, a transition to pay-per-use is under way, which will initially have a negative impact on sales in both business units. In the long term, this new business model will result in higher recurring sales and thus an improved outlook going forward.

Trend

SECURE COMMUNICATIONS

	The quarter				Full-year
	Q4 Q4 Change			Q1–4	Q1–4	Change
	20/21	19/20	%	20/21	19/20	%
Sales, SEK million	56.9	53.1	7.2	207.8	189.3	9.8
Operating profit, SEK million	6.8	3.5	94.3	9.5	2.9	227.6
Operating margin, %	12.0	6.6	n/a	4.6	1.5	n/a

The operating area continues to grow even though the pandemic has entailed difficulties in completing physical deliveries. Sales increased in all customer segments during the fiscal year. However, growth is primarily a result of increased sales from approved crypto products that protect information essential to the security of critical social functions. The positive operating profit trend during the fourth quarter and the fiscal year is primarily due to increased sales and a higher share of product and service deliveries, which have a higher operating margin than project-based development projects.

The financial outcome for 2020/2021 includes a reversal of a reserve for a contingent consideration amounting to SEK 1.7 million (8.8) and impairment of intangible assets totaling a negative SEK 2.2 million (neg: 7.4). Excluding these items, operating profit was SEK 10.0 million (1.5). These items for 2020/2021 pertain to the acquisition of assets in the Swedish IT company Columbitech AB in 2019. The impairment was based on the assessment that the market will develop more slowly than Sectra's original expectations.

Demand for Secure Communications' services and products remains strong and order bookings have almost doubled compared to the preceding year. The increase pertains mainly to orders of products and services from customers in the Netherlands, Sweden and the rest of Europe. Sweden is still the operating area's largest market, but we are attracting more and more national security customers within the EU and NATO who need increased cybersecurity. We are meeting this demand with security-approved products. During the fourth quarter, the European Council approved the Sectra Tiger/S 7401 LTE eavesdrop-proof phone for voice communication and transferring classified information.

During the pandemic, it has become abundantly clear that society's critical organizations need tools and infrastructure to work remotely in a safe and efficient manner so that they can perform their everyday work tasks even in a crisis. Sectra's mobile VPN can serve an important function in this regard. Increased threats of ransomware attacks targeted at critical social functions such as energy companies and healthcare also contribute to the demand for Sectra's services. To meet these needs, we also launched a new service, Sectra Wire, that helps civil authorities and large corporations with secure digital communication and remote collaboration. The service can be used with other crypto products from Sectra for a more complete security solution.

During 2020/2021, we continued to invest in projects including offerings for critical infrastructure and information security in conjunction with mobile working for government agencies and private business. We have received a positive response and initiated business in these growth segments, but we are still in the investment and establishment phase. Although there is a major underlying need for our offerings, we have grown slower than planned within critical infrastructure. This is due primarily to the pandemic, which has led to potential customers delaying purchasing decisions and deliveries.

A new service, Sectra Wire, was launched in partnership with the Swiss security company Wire. The service includes an easy-touse app for secure digital communication and remote collaboration and is compatible with all major operating systems.

OTHER OPERATIONS

	The quarter				Full-year
	Q4 Q4 Change	Q1–4		Q1–4	Change
	20/21	19/20	%	20/21	19/20	%
Sales, SEK million	18.2	18.6	-2.2	74.5	68.6	8.6
Operating profit, SEK million	-26.2	-7.5	-249.3	-38.3	-26.4	-45.1
Operating margin, %	neg	neg	n/a	neg	neg	n/a

Other Operations pertain to Sectra's joint functions for administration, recruitment, Group finance, IT, regulatory affairs, people and brand, and investor relations activities as well as the Group's financing activities.

PARENT COMPANY

The Parent Company's income statement and balance sheet are reported on page 21. The Parent Company, Sectra AB, includes the Business Innovation operating segment as well as the head office's joint functions for administration, Group finance, IT, regulatory affairs, recruitment, people and brand, investor relations activities and the Group's financing activities.

THE SHARE

2020 share redemption program and Swedish tax return help

During October 2020, Sectra carried out a share redemption program, whereby SEK 4.50 per share was distributed to the shareholders through a 2:1 share split, combined with a mandatory redemption process and a bonus issue to restore the share capital. The corresponding distribution to the shareholders in the preceding year was SEK 4.50 per share. In the Swedish tax assessment, a redemption or sale of redemption shares (designated SECT IL A and SECT IL B) is to be declared as a sale of shares on Form K4. For more information, visit investor.sectra.com/event/share-redemption-program-2020/.

Share-related incentive programs, new share issue and recalculation of conversion prices

On April 30, 2021, Sectra's share capital totaled SEK 38,525,494, distributed between 38,525,494 shares. Of these shares, 2,620,692 are Class A shares and 35,904,802 are Class B shares. This number includes a new issue of 19,474 Class B shares carried out in the third quarter due to the conversion of the 2016/2020 convertible program.

Due to the share redemption program for 2020, the Board decided to recalculate the conversion prices for outstanding convertible programs. This recalculation means that the financial compensation to the holders of convertibles in relation to the shareholders is reasonable. For dilution effects and current conversion prices after the recalculation made after the balance-sheet date, refer to the information on investor.sectra.com/the-share/share-related-incentive-programs/.

As of the publication date of this report, on full exercise of outstanding convertibles, the number of Class B shares will increase by 7,968, corresponding to less than 0.1% of the share capital and 0.1% of the voting rights in the company.

Authorizations of new share issue and repurchase of own shares

The 2020 AGM authorized the Board, for the period until the next AGM, to decide on the new issue of not more than 3,700,000 Class B shares for consideration in the form of cash payment, offsetting of debt or contribution in kind whereby payment through offsetting of debt may deviate from shareholders' preferential rights. If the authorization is fully exercised, the dilution effect will be approximately 10% of the share capital and approximately 6% of the voting rights.

The AGM also resolved to authorize the Board, on one or more occasions, during the period until the next AGM, to make decisions on the acquisition and transfer of Class B treasury shares. A condition for the authorization is that the company's holding of treasury shares at no time exceeds 10% of all shares in the company.

At the time of publication of this financial report, the Board had not utilized this authorization.

2021 AGM AND PROPOSED SHARE REDEMPTION PROGRAM

Proposed share redemption program/dividend

For the 2020/2021 fiscal year, the Board and the President propose that the AGM resolve to distribute SEK 4.50 per share (or SEK 0.90 per share after the completion of the 5:1 share split proposed by the Board for resolution by the AGM) to the shareholders through a 2:1 share split in combination with a mandatory redemption process. No ordinary dividend is proposed. The corresponding distribution to the shareholders in the preceding year was SEK 4.50 per share. This proposal corresponds to a dividend yield of 0.7% based on the year-end share price. Combined with the price trend, this represents total value growth of 45.1% for the Sectra share during the fiscal year.

The proposal is in line with Sectra's dividend policy. The Board deems that the company's current balance sheet and cash flows are of adequate strength to secure the development of the business, while providing the shareholders with a high return. In its assessment, the Board took Sectra's levels of incoming orders, earnings and expected cash flow over the coming year into account, as well as the uncertainties brought by the COVID-19 pandemic; refer to Risks and risk management on page 14. With a strong financial position, positive cash flow and significant recurring revenue, Sectra is well equipped to manage the uncertainty resulting from the pandemic.

At the end of the fiscal year, the Group's equity/assets ratio was 54.2%. The dividend policy and Sectra's financial goals state that the equity/assets ratio is to exceed 30%, and it will continue to do so, by a healthy margin, following a resolution in favor of the Board's proposed redemption process. Additional information regarding the proposed share split and mandatory redemption process will be published in the notice of the AGM and the full proposal to the AGM.

2021 AGM and Nomination Committee

The AGM is scheduled for September 14, 2021 in Linköping, Sweden. Shareholders are entitled to have a matter addressed by the AGM. The notice of the AGM is to be issued not earlier than six weeks and not later than four weeks prior to the AGM. To ensure that the company has time to include matters in the notice, requests for matters to be addressed by the AGM must be received by the company not later than seven weeks prior to the AGM. Requests to have matters addressed by the AGM are to be submitted to the Board in writing via email: info.investor@sectra.se, or by mail: Sectra AB, Attn. Board of Directors, Teknikringen 20, SE-583 30 Linköping, Sweden.

The composition of the Nomination Committee is in accordance with the instructions adopted at the 2020 AGM. If any of the largest shareholders in terms of voting rights has waived their right to appoint a member of the Nomination Committee, the next shareholder in order of size has been given the opportunity to appoint a member. Elisabet Jamal Bergström has been a new member since April 2021. She replaced SEB Investment Management's previous representative, Martin Gärtner, who left the Nomination Committee for another assignment. After the change, the Nomination Committee comprises the following members:

• Torbjörn Kronander (for own and related parties' shareholdings)
• Jan Särlvik (representing Nordea Investment Funds)
• Elisabet Jamal Bergström (representing SEB Investment Management)
• Jan-Olof Brüer (in his role as Chairman of the Board and for own and related parties' shareholdings)

Jan Särlvik is Chairman of the Nomination Committee. Torbjörn Kronander, the company's largest shareholder in terms of votes, decided to abstain from the chairmanship due to his role as President and CEO of Sectra AB.

The Nomination Committee will prepare and submit proposals regarding:

• election of the Chairman of the Board and other members of the Board of Directors
• allocation of Board fee payments to the Chairman and other members of the Board and potential remuneration for committee work
• election of and fees to the auditors and deputy auditors (where applicable)
• resolution on amendments to the Nomination Committee instructions, if the Nomination Committee deems such amendments to be necessary
• Chairman of the AGM.

The Nomination Committee's proposals will be presented no later than in connection with the notice of the General Meeting of Shareholders and be available on the company's website not earlier than six weeks and not later than four weeks prior to the Meeting date. Shareholders who wish to submit proposals to the Nomination Committee may do so in writing by email: info.investor@sectra.com, or by mail: Sectra AB, Attn. Nomination Committee, Teknikringen 20, SE-583 30 Linköping, Sweden. In order for the Nomination Committee to address a proposal, the proposal must arrive in ample time prior to the notice of the AGM.

Annual Report, Sustainability Report and Corporate Governance Report

Sectra's Annual Report, Sustainability Report and Corporate Governance Report will be announced through a press release in the week of June 28, 2021 and will be published on the company's website: investor.sectra.com

RISKS AND UNCERTAINTIES

Through its operations, Sectra is exposed to such business risks as dependence on major customers and partners, the effect of currency fluctuations on pricing in the markets in which the Group is active, and property and liability risks. Sectra is also exposed to various types of financial risks such as currency, interest-rate, credit and liquidity risks. A detailed description of the risks and uncertainties as well as Sectra's strategies and tactics for minimizing risk exposure and limiting adverse effects are provided in the Administration Report in the Group's Annual Report for the 2019/2020 fiscal year in the administration report on page 65 and in Note 30 on page 95. No significant events have occurred that would alter the conditions reported.

The COVID-19 pandemic

For risks and uncertainties related to the COVID-19 pandemic, refer to page 5 of this interim report as well as page 67 of Sectra's 2019/2020 Annual and Sustainability Report.

Brexit

Our assessment remains that Brexit will not significantly impact Sectra's operations. The UK left the EU on January 31, 2020. Transition rules were in effect until the end of the year, which entailed that the country remained part of the EU single market and customs union. As of January 1, 2021, the relationship between the EU and the UK is governed by the new EU-UK Trade and Cooperation Agreement. The uncertainty that primarily concerns Sectra is linked to the General Data Protection Regulation (GDPR) and the possibilities of sharing personal data with third countries, primarily owing to the Schrems II ruling by the EU Court of Justice. However, the UK will be considered an EU state with respect to GDPR until June 30, 2021. We have planned and implemented measures to ensure we can maintain support for the products developed in the UK and sold internationally, even in the event that the EU decides that the UK's data protection laws are not sufficient to continue sharing data in the same way as between the EU member states.

RELATED-PARTY TRANSACTIONS

No significant transactions with related parties took place in the reporting period.

FOR FURTHER INFORMATION

Contact Sectra's CEO Torbjörn Kronander, telephone +46 13 23 52 27 or email info.investor@sectra.se.

Presentation of the interim report

Time: June 2, 2021, at 10:00 am

Torbjörn Kronander, President and CEO of Sectra AB, and Mats Franzén, CFO of Sectra AB, will present the financial report and answer questions. The presentation will be held in English.

To participate, follow along on the website or call one of the following numbers 10 to 15 minutes before the scheduled start time:

SE +46850558355

UK +443333009265

US +18338230590

Follow live or listen to the recording afterward: investor.sectra.com/q4report2021

Financial calendar and 2021 Annual General Meeting

Three-month interim report	September 3, 2021 at 8:15 a.m. (CEST)
Annual General Meeting	September 14, 2021 at 3:30 p.m. (CEST)
Six-month interim report	December 10, 2021 at 8:15 a.m. (CET)
Nine-month interim report	March 9, 2022 at 8:15 a.m. (CET)
Year-end report 2021/2022	June 3, 2022 at 8:15 a.m. (CEST)

For other IR events, visit: investor.sectra.com/events-and-presentations/

ASSURANCE

The Board of Directors and the President of Sectra AB (publ) hereby assure that the year-end report for the period May 2020–April 2021 provides a true and fair view of the Parent Company's and Group's operations, financial position and earnings and describes the significant risks and uncertainties facing the Parent Company and other companies in the Group.

Linköping, June 2, 2021

Torbjörn Kronander Jan-Olof Brüer Christer Nilsson Birgitta Hagenfeldt President, CEO and Board member Chairman Board member Board member

Board member Board member Board member Board member

Jonas Yngvesson Anders Persson Tomas Puusepp Fredrik Robertsson

Filip Klintenstedt Bengt Hellman

Board member and employee representative Board member and employee representative

This report was not reviewed by the company's auditor.

GROUP

Condensed consolidated income statements

SEK thousand	3 months	3 months	Full-year	Full-year
	Feb–Apr	Feb–Apr	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Net sales	526,198	507,618	1,632,427	1,661,138
Capitalized work for own use	12,324	12,135	47,382	41,757
Reversal of contingent consideration	1,171	37	2,871	8,873
Other operating income	76	1,979	1,161	3,714
Total revenue	539,769	521,769	1,683,841	1,715,482
Goods for resale	-48,680	-62,528	-196,167	-248,305
Personnel costs	-249,651	-232,115	-854,518	-815,176
Other external costs	-55,260	-84,468	-199,967	-276,978
Depreciation/amortization and
impairment	-22,257	-19,085	-83,113	-79,675
Total operating expenses	-375,848	-398,196	-1,333,765	-1,420,134
Operating profit	163,921	123,573	350,076	295,348
Total financial items	2,565	3,168	-1,831	7,689
Profit after financial items	166,486	126,741	348,245	303,037
Taxes	-33,879	-27,529	-72,732	-65,683
Profit for the period	132,607	99,212	275,512	237,354
Profit for the period attributable to:
Parent Company owners	132,607	99,212	275,512	237,354
Earnings per share
Before dilution, SEK	3.44	2.58	7.15	6.18
After dilution, SEK	3.44	2.57	7.15	6.16
No. of shares
Before dilution	38,525,494	38,506,020	38,525,494	38,506,020
After dilution 1	38,533,462	38,533,253	38,533,462	38,533,253
Average, before dilution	38,525,494	38,506,020	38,514,134	38,416,683
Average, after dilution	38,533,462	38,533,253	38,533,340	38,531,852

1) Dilution of the number of shares is based on the convertible programs issued in 2017/2018. On full exercise of convertibles, the number of shares will increase by 7,968.

Consolidated statement of comprehensive income

SEK thousand	3 months	3 months	Full-year	Full-year
	Feb–Apr	Feb–Apr	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Profit for the period	132,607	99,212	275,512	237,354
Translation differences	1,532	-6,267	-27,326	-475
Total other comprehensive income for
the period	1,532	-6,267	-27,326	-475
Total comprehensive income for the
period	134,139	92,945	248,186	236,879

Condensed consolidated balance sheets

SEK thousand	Apr 30,	Apr 30,
	2021	2020
Assets
Intangible assets	206,999	193,368
Tangible assets	55,660	66,297
Right-of-use assets	73,277	84,275
Other shares and participations	18	19
Long-term accounts receivable	140,598	161,433
Deferred tax assets	3,372	4,226
Total fixed assets	479,924	509,618
Other current assets	717,174	656,929
Cash and bank balances	454,854	345,300
Total current assets	1,172,028	1,002,229
Total assets	1,651,952	1,511,847
Equity and liabilities
Equity	895,623	817,213
Provisions	0	17,469
Deferred tax liabilities	3,723	4,799
Non-current lease liabilities	47,655	58,561
Other long-term liabilities	1,903	2,951
Total long-term liabilities	53,281	83,780
Provisions	6,361	0
Current lease liabilities	22,847	22,402
Other current liabilities	673,840	588,452
Total current liabilities	703,048	610,854
Total equity and liabilities	1,651,952	1,511,847

Condensed consolidated statement of changes in equity

SEK thousand	Full-year	Full-year
	May–Apr	May–Apr
	2020/2021	2019/2020
Equity at start of period	817,213	727,909
Comprehensive income for the period	248,186	236,879
Dividend/redemption of shares	-173,277	-172,588
Settlement of share-related payments	3,500	25,013
Equity at end of period	895,623	817,213

Consolidated cash-flow statements

SEK thousand	Full-year	Full-year
	May–Apr	May–Apr
	2020/2021	2019/2020
Operating activities
Operating profit	350,076	295,348
Adjustment for non-cash items	99,293	102,686
Interest and dividends received	7,094	6,785
Interest paid	-1,844	-2,748
Income tax paid	-72,476	-74,797
Cash flow from operations before changes in working capital	382,143	327,274
Changes in working capital
Change in inventories	7,603	8,546
Change in receivables	-91,890	-83,365
Change in current liabilities	74,331	43,817
Cash flow from operations	372,187	296,272
Investing activities
Acquisitions of intangible assets	-47,304	-44,775
Acquisitions of tangible assets	-20,351	-32,967
Acquisition of financial assets	0	-812
Divestment of financial assets	835	18
Cash flow from investing activities	-66,820	-78,536
Financing activities
Repayment of lease liabilities	-22,490	-21,018
Repayment of long-term liabilities	-998	0
Payment of contingent consideration	-1,923	-2,937
Redemption of shares	-173,277	-172,588
Cash flow from financing activities	-198,688	-196,543
Cash flow for the year	106,679	21,193
Cash and cash equivalents, opening balance	345,300	331,935
Exchange-rate difference in cash and cash equivalents	2,875	-7,828
Cash and cash equivalents, closing balance	454,854	345,300
Unutilized credit facilities	15,000	15,000

Key figures

	Full-year	Full-year
	Apr 30,	Apr 30,
	2021	2020
Order bookings, SEK million	2,651.6	1,816.0
Operating margin, %	21.4	17.8
Profit margin, %	21.3	18.2
Average no. of employees	828	780
Cash flow per share before dilution, SEK	9.66	7.69
Cash flow per share after dilution, SEK	9.66	7.69
Value added, SEK million	1,204.6	1,110.5
P/E ratio, multiple	84.6	68.0
Share price at end of period, SEK	605.0	420.0
Return on equity, %	32.2	30.7
Return on capital employed, %	37.4	36.8
Return on total capital, %	22.1	21.6
Equity/assets ratio, %	54.2	54.1
Liquidity ratio, multiple	1.7	1.7
Equity per share before dilution, SEK	23.25	21.22
Equity per share after dilution, SEK	23.24	21.21

Exchange rates

Currency	Average rates in SEK		Closing rates in SEK
	Q4 2020/2021	Q4 2019/2020	Change %	Apr 30, 2021	Apr 30, 2020	Change %
US dollar, 1 USD	8.65	9.59	-9.8	8.33	9.79	-14.9
Euro, 1 EUR	10.22	10.63	-3.9	10.09	10.65	-5.3
British pound, 1 GBP	11.44	12.12	-5.6	11.60	12.18	-4.8

Condensed consolidated income statements and quarterly alternative performance measures¹

SEK million				2020/2021				2019/2020
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Net sales	526.2	394.2	413.2	298.9	507.6	457.4	363.3	332.8
Capitalized work for own use	12.3	13.5	11.6	9.9	12.1	14.3	8.9	6.4
Reversal of contingent consideration	1.2	0	1.1	0.6	0.0	8.8	0.0	0.0
Other operating income	0.1	0.6	0.5	0.0	2.0	0.7	0.2	0.8
Operating expenses2	-353.6	-319.1	-315.2	-262.8	-379.0	-355.2	-312.4	-293.7
Depreciation/amortization and impairment2	-22.3	-20.1	-21.5	-19.2	-19.1	-26.3	-17.4	-16.9
Operating profit	163.9	69.1	89.6	27.4	123.6	99.7	42.7	29.4
Total financial items	2.6	-1.3	2.9	-5.9	3.2	1.0	2.3	1.3
Profit after financial items	166.5	67.8	92.5	21.4	126.7	100.7	44.9	30.6
Tax on earnings for the period	-33.9	-14.5	-19.8	-4.6	-27.5	-21.5	-10.0	-6.6
Profit for the period	132.6	53.3	72.7	16.8	99.2	79.2	34.9	24.1
Order bookings, SEK million	689.2	598.0	752.1	612.3	716.2	435.4	425.7	238.7
Operating margin, %	31.1	17.5	21.7	9.2	24.3	21.8	11.8	8.8
Cash flow per share before dilution, SEK	2.95	3.55	0.94	2.22	2.10	3.48	2.85	-0.73
Cash flow per share after dilution, SEK	2.95	3.55	0.94	2.22	2.10	3.48	2.83	-0.73
Earnings per share, SEK	3.44	1.38	1.89	0.44	2.58	2.06	0.91	0.63
Return on equity, %	16.0	6.8	9.5	2.1	12.9	10.9	5.2	3.3
Return on capital employed, %	17.8	7.8	10.9	2.4	15.3	12.9	6.2	3.9
Equity/assets ratio, %	54.2	51.7	55.0	58.1	54.1	51.2	49.7	56.2
Equity per share before dilution, SEK	23.25	19.77	18.44	20.95	21.22	18.81	16.10	19.33
Share price at end of period, SEK		605.00 712.50 543.00		601.00			420.00 396.00 321.50 325.00

Five-year summary1

	2020/2021	2019/2020	2018/2019	2017/2018	2016/2017
Order bookings, SEK million	2,651.6	1,816.0	2,132.8	1,492.5	1,177.7
Net sales, SEK million	1,632.4	1,661.1	1,413.5	1,209.2	1,125.1
Operating profit, SEK million	350.1	295.3	235.5	214.3	195.0
Profit after financial items, SEK million	348.2	303.0	248.8	231.2	201.1
Profit for the period after tax, SEK million	275.5	237.4	199.0	184.7	153.8
Operating margin, %	21.4	17.8	16.7	17.7	17.3
Profit margin, %	21.3	18.2	17.6	19.1	17.9
Earnings per share before dilution, SEK	7.15	6.18	5.21	4.86	4.07
Earnings per share after dilution, SEK	7.15	6.16	5.17	4.80	4.00
Dividend/redemption program per share, SEK	4.50	4.50	4.50	4.50	4.50
Share price at end of year, SEK	605.00	420.00	322.00	194.20	162.50
P/E ratio, multiple	84.6	68.0	61.8	40.0	39.9
Return on equity, %	32.2	30.7	29.8	30.4	26.5
Return on capital employed, %	37.4	36.8	35.9	34.5	30.9
Return on total capital, %	22.1	21.6	19.6	19.0	17.5
Equity per share before dilution, SEK	23.25	21.22	18.98	17.34	16.21
Equity per share after dilution, SEK	23.24	21.21	18.89	17.16	15.95
Equity/assets ratio, %	54.2	54.1	55.4	51.4	50.5

1) The comparative years 2017/2018 and earlier have been restated. Refer to Note 5 on page 76 of Sectra's 2018/2019 Annual Report.

2) In the year-end report for 2019/2020, an item of SEK 7.4 million was reported in depreciation/amortization for the fourth quarter instead of in operating expenses. The amounts have been corrected in the above table. The quarter's operating profit and all items for the 2019/2020 fiscal year were reported accurately.

OPERATING SEGMENTS

Sales by business segment

SEK million	3 months Feb–April 2021	3 months Feb–April 2020	Full-year May–Apr 2020/2021	Full-year May–Apr 2019/2020
Imaging IT Solutions	460.1	445.9	1,397.7	1,428.2
Secure Communications	56.9	53.1	207.8	189.3
Business Innovation	17.4	22.5	55.8	78.1
Other Operations	18.2	18.6	74.5	68.6
Group eliminations	-26.4	-32.5	-103.4	-103.1
Total	526.2	507.6	1,632.4	1,661.1

Operating profit/loss by business segment

SEK million	3 months	3 months	Full-year	Full-year
	Feb–April	Feb–April	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Imaging IT Solutions	177.5	131.6	378.0	317.6
Secure Communications	6.8	3.5	9.5	2.9
Business Innovation	5.9	8.7	0.8	12.9
Other Operations	-26.2	-7.5	-38.3	-26.4
Group eliminations	-0.1	-12.7	0.1	-11.7
Total	163.9	123.6	350.1	295.3

Sales by geographic market

SEK million	3 months Feb–April 2021	3 months Feb–April 2020	Full-year May–Apr 2020/2021	Full-year May–Apr 2019/2020
Sweden	111.4	109.9	391.2	383.2
United States	174.3	173.7	465.5	461.4
United Kingdom	66.3	64.9	216.2	230.7
Netherlands	33.2	54.9	143.1	149.1
Rest of Europe	95.9	80.9	316.0	334.4
Rest of World	45.1	23.3	100.4	102.3
Total	526.2	507.6	1,632.4	1,661.1

External sales by product group and segment

Imaging IT Solutions

SEK million	3 months Feb–April 2021	3 months Feb–April 2020	Full-year May–Apr 2020/2021	Full-year May–Apr 2019/2020
Hardware and third-party products	40.5	53.0	109.0	142.8
Software	162.1	153.1	374.3	406.8
Services	255.9	234.4	908.4	869.1
Total	458.5	440.5	1,391.7	1,418.7

Secure Communications

SEK million	3 months	3 months	Full-year	Full-year
	Feb–April	Feb–April	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Hardware and third-party products	17.6	21.3	78.0	83.1
Software	6.4	6.2	27.1	22.8
Services	32.5	25.1	101.2	81.9
Total	56.5	52.6	206.3	187.8

Business Innovation

SEK million	3 months Feb–April 2021	3 months Feb–April 2020	Full-year May–Apr 2020/2021	Full-year May–Apr 2019/2020
Hardware and third-party products	8.5	10.3	24.3	26.0
Software	2.2	3.7	8.3	25.8
Services	0.3	0.2	0.8	1.7
Total	11.0	14.2	33.4	53.5

Other Operations

SEK million	3 months	3 months	Full-year	Full-year
	Feb–April	Feb–April	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Hardware and third-party products	0.0	0.0	0.0	0.0
Software	0.0	0.0	0.0	0.0
Services	0.2	0.3	1.1	1.1
Total	0.2	0.3	1.1	1.1

Group
SEK million	3 months	3 months	Full-year	Full-year
	Feb–April	Feb–April	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Hardware and third-party products	66.7	84.7	211.2	251.9
Software	170.7	162.9	409.6	455.4
Services	288.8	260.0	1,011.6	953.8
Total	526.2	507.6	1,632.4	1,661.1

PARENT COMPANY

Condensed Parent Company income statements

SEK thousand	3 months	3 months	Full-year	Full-year
	Feb–Apr	Feb–Apr	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Net sales	35,434	40,915	129,864	145,610
Capitalized work for own use	1,955	1,325	4,955	4,873
Other operating income	18	-39	72	880
Total revenue	37,407	42,201	134,891	151,363
Goods for resale	-1,894	-3,851	-9,066	-14,840
Personnel costs	-21,220	-16,888	-72,805	-67,497
Other external costs	-36,331	-22,503	-91,349	-69,353
Depreciation/amortization	-3,410	-3,411	-13,882	-12,262
Total operating expenses	-62,855	-46,653	-187,102	-163,952
Operating loss	-25,448	-4,452	-52,211	-12,589
Total financial items	4,878	14,140	2,282	27,736
Profit/loss after financial items	-20,570	9,688	-49,929	15,147
Appropriations	296,400	267,250	296,400	267,250
Profit before tax	275,830	276,938	246,471	282,397
Tax on earnings for the period	-56,892	-56,475	-50,608	-57,640
Profit for the period	218,938	220,463	195,863	224,757
Comprehensive income for the
period	218,938	220,463	195,863	224,757

Condensed Parent Company balance sheets

Apr 30,	Apr 30,
2021	2020
17,553	17,383
22,411	23,506
250,748	266,587
290,712	307,476
	465,924
347,961	246,077
843,069	712,001
1,133,781	1,019,477
633,383	607,297
389	2,951
389	2,951
500,009	409,229
500,009	409,229
1,133,781	1,019,477
	495,108

Pledged assets and contingent liabilities

SEK thousand	Apr 30,	Apr 30,
	2021	2020
Chattel mortgages	11,000	11,000
Total pledged assets	11,000	11,000
Guarantees on behalf of Group companies	80,617	92,599
Total contingent liabilities	80,617	92,599

NOTE 1 Accounting policies

This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting, the Swedish Annual Accounts Act and the Swedish Securities Markets Act. The accounting policies and calculation methods applied are consistent with those described in Sectra's 2019/2020 Annual Report.

FINANCIAL DEFINITIONS AND ALTERNATIVE PERFORMANCE MEASURES

The Group applies the European Securities and Markets Authority (ESMA) Guidelines on Alternative Performance Measures (see below). The Group applies alternative performance measures since the company believes they provide valuable supplementary information for management and investors given that they play a central role when it comes to understanding and evaluating the Group's operations.

Equity per share before dilution

	3 months	3 months	Full-year	Full-year
	Feb–April	Feb–April	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Adjusted equity, SEK thousand	895,623	817,213	895,623	817,213
Number of shares before dilution at the end of the
period	38,525,494	38,506,020	38,525,494	38,506,020
Equity per share before dilution, SEK	23.25	21.22	23.25	21.22

Purpose Calculation

Measures the company's net value per share and shows if a company is increasing shareholder capital over time given currently available participations.

Adjusted equity divided by the number of shares before dilution at the end of the period.

Equity per share after dilution

Equity per share after dilution, SEK	23.24	21.21
period	38,533,462	38,533,253
Number of shares after dilution at the end of the
Adjusted equity, SEK thousand	895,623	817,213
	May–Apr 2020/2021	May–Apr 2019/2020
	Full-year	Full-year

Measures the company's net value per share and shows if a company is increasing shareholder capital over time given the maximum number of available participations.

Purpose Calculation

Adjusted equity divided by the number of shares after dilution at the end of the period.

Value added

SEK thousand	Full-year	Full-year
	May–Apr	May–Apr
	2020/2021	2019/2020
Operating profit	350,076	295,348
Personnel costs	854,518	815,176
Value added	1,204,594	1,110,524

Shows the value of the company's production. Operating profit plus personnel costs.

Purpose Calculation

Cash flow per share before dilution

Cash flow per share before dilution, SEK	2.95	2.10	9.66	7.69
period	38,525,494	38,506,020	38,525,494	38,506,020
Number of shares before dilution at the end of the
Cash flow from operations, SEK thousand	113,666	81,045	372,187	296,272
	3 months Feb–April 2021	3 months Feb–April 2020	Full-year May–Apr 2020/2021	Full-year May–Apr 2019/2020

Shows the cash flow the company generated per share before capital investments and financing.

Purpose Calculation

Cash flow from operations divided by the number of shares before dilution at the end of the period.

Cash flow per share after dilution

	3 months	3 months	Full-year	Full-year
	Feb–April	Feb–April	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Cash flow from operations, SEK thousand	113,666	81,045	372,187	296,272
Number of shares after dilution at the end of the
period	38,533,462	38,533,253	38,533,462	38,533,253
Cash flow per share after dilution, SEK	2.95	2.10	9.66	7.69

Shows the cash flow the company generated per share before capital investments and financing.

Purpose Calculation

Cash flow from operations divided by the number of shares after dilution at the end of the period.

Liquidity

SEK thousand	Full-year	Full-year
	May–Apr	May–Apr
	2020/2021	2019/2020
Current assets	1,172,028	1,002,229
Unutilized overdraft facilities	15,000	15,000
Current liabilities	703,048	610,854
Liquidity	1.7	1.7

Average no. of employees

Order bookings

Purpose Calculation

Shows the company's current ability to pay. Current assets plus overdraft facility divided by current liabilities.

Purpose Calculation

Shows the number of full-time positions in a certain period. Average number of full-time employees during the period.

Purpose Calculation

Indicates future revenue in the company. Value of orders received or changes to earlier orders during the reporting period.

P/E ratio

P/E ratio, multiple	84.6	68.0
	7.15	6.18
month period
Earnings per share before dilution for the rolling 12-
Share price at end of period, SEK	605	420
SEK	Full-year May–Apr 2020/2021	Full-year May–Apr 2019/2020

Shows how highly the market values the company's profits and how long it will take for the shareholders to get a return on their investment.

Purpose Calculation

Share price at the end of the period divided by earnings per share for the most recent rolling 12-month period before dilution.

Earnings per share before dilution

Purpose	Calculation
Earnings per share before dilution, SEK	3.44	2.58	7.15	6.18
before dilution	38,525,494	38,506,020	38,514,134	38,416,683
Average number of shares at the end of the period
Profit after tax, SEK thousand	132,607	99,212	275,512	237,354
	3 months Feb–April 2021	3 months Feb–Apr 2020	Full-year May–Apr 2020/2021	Full-year May–Apr 2019/2020

Shows each share's participation in the company's earnings during the reporting period.

Profit/loss after tax divided by the average number of shares before dilution at the end of the period. This performance measure is defined in accordance with IFRS.

Earnings per share after dilution

	3 months	3 months	Full-year	Full-year
	Feb–April	Feb–Apr	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Profit after tax, SEK thousand	132,607	99,212	275,512	237,354
Average number of shares at the end of the period
after dilution	38,533,462	38,533,253	38,533,340	38,531,852
Earnings per share after dilution, SEK	3.44	2.57	7.15	6.16

Purpose Calculation

Shows each share's participation in the company's earnings during the reporting period, taking potential shares that may arise after conversion into account.

Profit/loss after tax divided by the average number of shares at the end of the period after dilution. This performance measure is defined in accordance with IFRS.

Return on equity

SEK thousand	3 months Feb–April 2021	3 months Feb–Apr 2020	Full-year May–Apr 2020/2021	Full-year May–Apr 2019/2020
Profit for the period	132,607	99,212	275,512	237,354
Equity at start of period	761,483	724,267	817,213	727,909
Equity at end of period	895,623	817,213	895,623	817,213
Average adjusted equity	828,553	770,740	856,418	772,561
Return on equity, %	16.0	12.9	32.2	30.7

Shows the return on capital attributable to the Parent Company owners.

Purpose Calculation

Profit for the period divided by average adjusted equity.

Return on capital employed (ROCE)

SEK thousand	3 months Feb–April 2021	3 months Feb–Apr 2020	Full-year May–Apr 2020/2021	Full-year May–Apr 2019/2020
Profit after financial items	166,486	126,741	348,245	303,037
Financial expenses	-461	-591	-1,844	-2,748
Average capital employed	936,851	832,008	936,851	832,008
Return on capital employed, %	17.8	15.3	37.4	36.8

Shows profitability based on how much capital is used in the operations.

Purpose Calculation

Profit after financial items plus financial expenses divided by average capital employed.

Return on total capital

	Full-year	Full-year
SEK thousand	May–Apr	May–Apr
	2020/2021	2019/2020
Profit after financial items	348,245	303,037
Financial expenses	-1,844	-2,748
Average total assets	1,581,900	1,413,332
Return on total capital, %	22.1	21.6
Purpose	Calculation

Shows the return on total assets. Profit after financial items plus financial expenses divided by average total assets.

Operating profit per share

	Full-year	Full-year
	May–Apr	May–Apr
	2020/2021	2019/2020
Operating profit, SEK thousand	350,076	295,348
Number of shares before dilution	38,525,494	38,506,020
Operating profit per share, SEK	9.09	7.67

Purpose Calculation

Shows earnings per share before interest and taxes. Operating profit divided by the number of shares before dilution on the balance-sheet date.

Operating margin

SEK thousand	3 months	3 months	Full-year	Full-year
	Feb–April	Feb–Apr	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Operating profit	163,921	123,573	350,076	295,348
Net sales	526,198	507,618	1,632,427	1,661,138
Operating margin, %	31.1	24.3	21.4	17.8

Measures operational profitability. This measure is used for the purpose of management by objectives in the operations.

Purpose Calculation

Operating profit divided by net sales.

Debt/equity ratio

SEK thousand	Full-year	Full-year
	May–Apr	May–Apr
	2020/2021	2019/2020
Interest-bearing liabilities	73,453	87,414
Equity	895,623	817,213
Debt/equity ratio	0.08	0.11

Shows to what extent the operations are financed by loans and describes the company's financial risk.

Purpose Calculation

Interest-bearing liabilities divided by equity.

Equity/assets ratio

Full-year	Full-year
May–Apr	May–Apr
2020/2021	2019/2020
895,623	817,213
1,651,952	1,511,847
54.2	54.1

Shows the portion of assets financed with equity. This measure is used for the purpose of management by objectives in the operations.

Purpose Calculation

Adjusted equity divided by total assets on the balance-sheet date.

Capital employed

SEK thousand	Full-year	Full-year
	May–Apr	May–Apr
	2020/2021	2019/2020
Total assets	1,651,952	1,511,847
Non-interest-bearing liabilities	682,877	607,220
Capital employed	969,075	904,627

Purpose Calculation Shows the portion of the company's assets that has been borrowed from, for example, the company's owners or external lenders, and shows the company's profitability in relation to externally financed capital and equity.

Total assets reduced by non-interest-bearing liabilities.

Growth in operating profit per share over a five-year period

SEK thousand		Full-year May–Apr 2020/2021	Full-year May–Apr 2019/2020
Operating profit per share before dilution		9.09	7.67
Operating profit per share before dilution five years
earlier		4.21	4.03
Growth in operating profit per share before
dilution over a five-year period, %		115.7	90.2
Purpose	Calculation

Shows the growth of the operations over a five-year period. This measure is used for the purpose of management by objectives in the operations.

Operating profit per share on the balance-sheet date less operating profit per share on the balance-sheet date five years earlier divided by operating profit per share on the balance-sheet date five years earlier.

Profit margin

SEK thousand	3 months	3 months	Full-year	Full-year
	Feb–April	Feb–Apr	May–Apr	May–Apr
	2021	2020	2020/2021	2019/2020
Profit after financial items	166,486	126,741	348,245	303,037
Net sales	526,198	507,618	1,632,427	1,661,138
Profit margin, %	31.6	25.0	21.3	18.2

Shows a comparison of profitability regardless of corporate tax rate.

Purpose Calculation

Profit after financial items divided by net sales.

GLOSSARY

Artificial intelligence (AI)

A collective term for the scientific field that studies the creation of machines and computer programs that display intelligent behavior. AI research encompasses numerous disciplines, including everything from studying philosophical issues to developing tangible technological solutions in such areas as medical diagnostics.

Cardiology/cardiovascular diseases

The field of medicine dealing with the functions and diseases of the heart.

Cloud/cloud solutions

From the term cloud computing. Cloud computing, meaning that computer power is stored on the internet or company-specific intranets and not on individual computers.

Critical infrastructure

Basic infrastructure that is essential for the functioning of society, such as roads, bridges and electricity and water supply.

Crypto

Equipment that uses mathematical manipulations (algorithms and keys) to encrypt information, so that it can be interpreted or read only by the intended recipient. To read encrypted information, the recipient must have the correct key and algorithm.

Elective healthcare

Healthcare planned in advance, which in contrast to acute care can be postponed for a period of time without serious medical consequences.

Neurodegenerative diseases

Diseases that cause progressive degeneration and/or death of nerve cells. This causes problems with movement or mental function.

Orthopaedics

A surgical specialty for disorders affecting the musculoskeletal system.

Pathology/histopathology/microscopy

A specialized medical area that uses tissues and body fluids for diagnostic purposes.

Picture archiving and communication system (PACS)

A system for managing medical images, such as digital radiology images.

Radiology

A health science discipline and medical specialty that uses technologies for imaging the human body, such as X-ray, magnetic resonance imaging (MRI) and ultrasound.

Vendor-neutral archive (VNA)

Also normally called a hospital-wide archive. IT solution for managing and archiving files such as medical images, audio files and film sequences in a shared multimedia archive.

VPN

A technology used to create a secure connection or "tunnel" between two points along an unsecured data network.

ABOUT SECTRA

Vision

To contribute to a healthier and safer society.

Mission statements

To increase the effectiveness of healthcare, while maintaining or increasing the quality of care.

To strengthen the stability and efficiency of society's most important functions through solutions for critical IT security.

Operating areas/business models

Imaging IT Solutions helps hospitals across the world to become more efficient, enabling them to care for more patients and save more lives. Increased use of medical images and aging populations that are living longer pose huge challenges to healthcare. Sectra's IT solutions and services for medical diagnostic imaging enable greater efficiency and contribute to healthcare advancements. Sectra has more than 2,000 installations of medical IT systems, and customers include some of the largest healthcare providers in the world.

Secure Communications helps society's critical functions, government officials and diplomats to use modern technology to exchange information securely, thereby contributing to a stable and secure society. Sectra's solutions and services increase cybersecurity by protecting some of society's most sensitive information and communications. Several of the business area's products are approved by the EU, NATO, and national security authorities.

Business Innovation gathers smaller activities that could eventually lead to major growth in Sectra's main areas or related niches.

Group-wide strategies for value creation and sustainable business development

Customer value

• Customers and customer satisfaction are always assigned top priority to enable long-term growth.
• Close relationships with demanding customers to ensure that Sectra's solutions meet market demands for quality, functionality, and usability.

Corporate culture and employees

A corporate culture that motivates and inspires the company's employees to solve customer problems, help their fellow human beings and meet—and in many cases exceed—customer expectations.

Innovation

Close cooperation with customers, universities and industrial partners in order to identify needs and ideas, combined with a corporate culture where management encourages the employees to test out new ideas and projects.

Geographic expansion

• International expansion mainly in areas and regions where Sectra holds an established position. This will primarily be achieved through organic growth, in certain cases supplemented by acquisitions that strengthen the Group's organic growth.
• Expansion into new geographic markets following thorough analysis and at a controlled pace as Sectra achieves a strong position in existing markets.

For more information, visit: https://investor.sectra.com

7 good reasons to invest in Sectra

International niche markets with strong growth potential

IT for healthcare, cybersecurity and critical infrastructure are rapidly evolving markets. This creates major growth opportunities for companies such as Sectra.

Stability, profitability and long-term growth

Sectra has a 40-year history of growth and profitability. More than 50% of the company's sales comprise recurring revenue from long-term customer contracts.

Strong, customer-focused corporate culture

A corporate culture focused on customer value and employees who are passionate about making a difference.

Strong brand with multinational reach

Sectra is an established brand in niche areas where trust and stable products are highly important success factors. We have a multinational reach, with thousands of customers worldwide.

Innovation

We maintain a high pace of innovation and continuously invest in new and ongoing development. We also have a self-financed portfolio of exciting projects with the potential to add significant value for customers and for Sectra.

Sustainable business model

Contributing to a better world is the foundation of Sectra's operations and business model. Helping our customers improve the efficiency and quality of patient care and increase cybersecurity in critical social functions is our most significant contribution to a sustainable society.

Long-standing owners and dedicated management

Principal owners who have been part of the company since the 1980s have firm dedication to the long-term development of the company, and all members of management are shareholders.