Quarterly Report • May 14, 2020
Quarterly Report
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STRATEC can report a very successful start to financial year 2020. In the first quarter, we generated organic sales growth of 20.1% and increased our adjusted EBIT by 53.9%. In response to these pleasing results, on May 4, 2020 we raised our guidance figure for organic sales growth in financial year 2020. Not only that, we also achieved important milestones in numerous current development projects and reached a well advanced stage of negotiations for new development cooperations. Our development pipeline is still well stocked and offers a superb basis for generating further sustainable growth at our company.
This being said, the first quarter of 2020 was an exceptional period, and that not only for STRATEC. COVID-19 has the world firmly in its grip and we are working flat out to play our part in containing the pandemic. Many of our customers offer relevant tests that are performed on systems designed and manufactured by STRATEC. To be able to support our partners, it is therefore crucial for our company to maintain its full supply capacity. At present, and notwithstanding various challenges, for example within the supply chain, we have managed to do this with great success. We will maintain this course with absolute consistency.
Our management has always accorded the utmost priority to protecting the health of our employees. We therefore took extensive measures in mid-February already in order to avoid infections within our workforce as far as possible.
We welcomed further new employees to the STRATEC Group once again in the first quarter of 2020 and slightly increased our organic employee totals compared with December 31, 2019. To be able to implement the large number of development projects, we expect to require further highly qualified staff in the years ahead as well.
Moreover, we are delighted, not least in these exceptional times that have once more demonstrated the robustness of our business model, to be able to propose what will already be the sixteenth consecutive increase in our dividend to € 0.84 per share for approval by our shareholders (previous year: € 0.82 per share).
Thank you for the trust you have placed in us.
On behalf of the Board of Management of STRATEC SE
Marcus Wolfinger Chief Executive Officer
| € 000s | Q1/20202 | Q1/20192 | Change |
|---|---|---|---|
| Sales | 56,504 | 46,569 | +21.3% |
| Adjusted EBITDA | 10,142 | 7,177 | +41.3% |
| Adjusted EBITDA margin (%) | 17.9 | 15.4 | +250 bps |
| Adjusted EBIT | 7,658 | 4,975 | +53.9% |
| Adjusted EBIT margin (%) | 13.6 | 10.7 | +290 bps |
| Adjusted consolidated net income3 | 6,246 | 3,756 | +66.3% |
| Adjusted earnings per share (€)3 | 0.52 | 0.31 | +67.7% |
| Earnings per share (€)3 | 0.37 | 0.11 | +236.4% |
bps = Basis points
1 For comparison purposes, adjusted figures exclude amortization resulting from purchase price allocations in the context of acquisitions
and the associated reorganization expenses.
To facilitate comparison, adjusted to account for the disposal of the Data Solutions business unit, which has been reported as a discontinued operation. Result from continuing operations.
STRATEC increased its consolidated sales year-on-year by 21.3% to € 56.5 million in the first quarter of 2020 (Q1/2019: € 46.6 million). Adjusted for exchange rate effects, this corresponds to organic sales growth of 20.1%. This dynamic sales performance was driven by all segments, while the COVID-19 pandemic, to date, had only a very minor positive impact on the sales performance in the first quarter. Within the Instrumentation segment, the business with service parts and consumables posted a particularly strong performance. System sales also rose substantially compared with the previous year. Diatron generated significant growth, not least in its business with veterinary diagnostics products. In the Smart Consumables segment, both product sales and sales with development and services increased in line with the budget.
Adjusted EBIT increased by 53.9% to € 7.7 million, up from € 5.0 million in the previous year's quarter. As a result, the adjusted EBIT margin improved year-on-year by 290 basis points to 13.6% (Q1/2019: 10.7%). This positive development in the margin was due in particular to positive benefits of scale, as well as to a good sales and product mix.
Given this increase in operating profitability and an additional reduction in the tax rate, consolidated net income from continuing operations increased by 66.3% to € 6.2 million (Q1/2019: € 3.8 million). Adjusted (basic) earnings per share from continuing operations amounted to € 0.52 in the first quarter of 2020, as against € 0.31 in the previous year.
To facilitate comparison, the figures stated above for the first quarter of 2020 and the previous year's figures have been adjusted to account for the disposal of the Data Solutions business unit, which has been reported as a discontinued operation. In the interests of comparability, the key earnings figures have also been adjusted to exclude amortization resulting from purchase price allocations in the context of acquisitions and associated reorganization expenses. A reconciliation of the adjusted figures with the figures reported in the consolidated income statement is provided below.
| € 000s | 01.01. – 03.31.2020 |
01.01. – 03.31.2019 |
|---|---|---|
| Adjusted EBIT | 7,658 | 4,975 |
| Adjustments • PPA amortization • Expenses relating to transactions and associated restructuring expenses |
-2,062 0 |
-2,277 -723 |
| EBIT | 5,596 | 1,975 |
| € 000s | 01.01. – 03.31.2020 |
01.01. – 03.31.2019 |
|---|---|---|
| Adjusted consolidated net income from continuing operations |
6,246 | 3,756 |
| Adjusted earnings per share from continuing operations in € (basic) |
0.52 | 0.31 |
| Adjustments • PPA amortization • Expenses relating to transactions and associated restructuring expenses • Taxes on income |
-2,062 0 320 |
-2,277 -723 556 |
| Consolidated net income from continuing operations |
4,503 | 1,312 |
| Earnings per share from continuing operations in € (basic) |
0.37 | 0.11 |
To account for its strong performance in the first four months and for current order forecasts from its customers, on May 4, 2020 STRATEC published an ad-hoc announcement in which it raised the guidance figure for its organic sales growth in financial year 2020.
Based on adjustments made to the previous year's figures to account for the disposal of the Data Solutions business unit (2019 sales basis: € 214.2 million), STRATEC now expects to generate constant-currency organic sales growth in a low double-digit percentage range. A figure of around 15% is forecast for the adjusted EBIT margin.
In connection with the COVID-19 pandemic, STRATEC is currently observing significantly positive and slightly negative effects in terms of its customer order and order forecasts. Overall, the company currently expects to see a notably positive impact on demand in the current financial year. All in all, the implications of the pandemic, such as those outlined above, but also potential interruptions within the supply chain, are still not fully visible. Apart from those effects that had already materialized by the end of April 2020, the above guidance therefore does not account for the effects of the pandemic.
For 2020, STRATEC has budgeted investments in property, plant and equipment and intangible assets at around 10% to 12% of sales. Investments in property, plant and equipment mainly relate to the construction work currently underway to significantly extend the buildings at the company's headquarters in Birkenfeld. This work is scheduled for completion in the third quarter of 2020. As a result, the investment ratio is expected to decrease further in 2021.
Customers launched a number of new products designed by STRATEC onto the market once again in the first quarter of 2020. Examples worth mentioning include significant software and hardware extensions for a molecular diagnostics analyzer system of a North American partner. Among other benefits, these extensions will increase test capacity and further enhance the user-friendliness of the system. Not only that, the KleeYa instrument – STRATEC's proprietary next-generation analyzer platform for chemiluminescence immunoassays – achieved CE conformity.
Given the continuing trend within the in-vitro diagnostics industry to outsource automation solutions to specialist com panies such as STRATEC, the company still has a well-filled development pipeline. In the first quarter, STRATEC also made further progress with numerous negotiations for promising future projects.
In the first quarter, STRATEC once again increased its organic employee totals compared with the previous year. Excluding employees at the Data Solutions business unit, which was sold at the beginning of May 2020, and including personnel hired from a temporary employment agency and trainees, the STRATEC Group had a total of 1,292 employees as of March 31, 2020. This corresponds to organic growth of 3.8% in the workforce compared with December 31, 2019. Due to its ongoing high level of development activity, STRATEC expects to have a growing need for highly qualified staff in the years ahead as well.
| € 000s | 03.31.2020 | 12.31.2019 |
|---|---|---|
| Non-current assets | ||
| Goodwill | 38,729 | 40,674 |
| Other intangible assets | 51,229 | 56,418 |
| Right-of-use assets | 7,858 | 8,583 |
| Property, plant and equipment | 50,402 | 47,338 |
| Non-current financial assets | 427 | 447 |
| Non-current contract assets | 17,395 | 15,616 |
| Deferred taxes | 1,040 | 1,207 |
| 167,080 | 170,283 | |
| Current assets | ||
| Inventories | 58,032 | 55,978 |
| Trade receivables | 39,326 | 34,121 |
| Current financial assets | 1,259 | 1,319 |
| Current other receivables and assets | 8,240 | 6,124 |
| Current contract assets | 5,959 | 4,780 |
| Income tax receivables | 4,346 | 4,101 |
| Cash and cash equivalents | 32,856 | 22,708 |
| 150,018 | 129,131 | |
| Total assets | 317,098 | 299,414 |
| € 000s | 03.31.2020 | 12.31.2019 |
|---|---|---|
| Shareholders' equity | ||
| Share capital | 12,030 | 12,030 |
| Capital reserve | 26,708 | 26,457 |
| Revenue reserves | 123,354 | 120,978 |
| Treasury stock | -89 | -89 |
| Other equity | -4,359 | -369 |
| 157,644 | 159,007 | |
| Non-current debt | ||
| Non-current financial liabilities | 104,417 | 90,378 |
| Non-current other liabilities | 378 | 481 |
| Non-current contract liabilities | 1,837 | 1,869 |
| Provisions for pensions | 5,232 | 5,077 |
| Deferred taxes | 6,748 | 6,931 |
| 118,612 | 104,736 | |
| Current debt | ||
| Current financial liabilities | 12,538 | 9,584 |
| Trade payables | 13,765 | 12,266 |
| Current other liabilities | 7,138 | 6,016 |
| Current contract liabilities | 3,640 | 4,407 |
| Provisions | 1,148 | 1,138 |
| Income tax liabilities | 2,613 | 2,260 |
| 40,842 | 35,671 | |
| Total shareholders' equity and debt | 317,098 | 299,414 |
for the Period from January 1 to March 31, 2020
| € 000s | 01.01. – 03.31.20201 | 01.01. – 03.31.20191 |
|---|---|---|
| Sales | 56,504 | 46,569 |
| Cost of sales | -39,836 | -36,073 |
| Gross profit | 16,668 | 10,496 |
| Research and development expenses | -2,775 | -2,169 |
| Sales-related expenses | -3,145 | -2,101 |
| General administration expenses | -5,149 | -4,534 |
| Other operating income and expenses | -3 | 283 |
| Earnings before interest and taxes (EBIT) | 5,596 | 1,975 |
| Net financial expenses | -276 | -452 |
| Earnings before taxes (EBT) | 5,320 | 1,523 |
| Taxes on income | -817 | -211 |
| Earnings from continuing operations | 4,503 | 1,312 |
| Earnings from discontinued operations | -2,127 | -1,628 |
| Consolidated net income | 2,376 | -316 |
| Items that may be subsequently reclassified to profit or loss: | ||
| Currency translation differences from translation of foreign operations |
-3,943 | 1,266 |
| Other comprehensive income (OCI) | -3,943 | 1,266 |
| Comprehensive income | -1,567 | 950 |
| Basic earnings per share in € | 0.20 | -0.03 |
| from continuing operations | 0.37 | 0.11 |
| from discontinued operations | -0.18 | -0.14 |
| No. of shares used as basis (undiluted) | 12,025,300 | 11,964,250 |
| Diluted earnings per share in € | 0.20 | -0.03 |
| from continuing operations | 0.37 | 0.11 |
| from discontinued operations | -0.18 | -0.14 |
| No. of shares used as basis (diluted) | 12,070,440 | 12,021,057 |
To facilitate comparison, adjusted to account for the disposal of the Data Solutions business unit, which has been reported as a discontinued operation.
| € 000s | 01.01. – 03.31.2020 | 01.01. – 03.31.2019 |
|---|---|---|
| I. Operations | ||
| Consolidated net income (after taxes) | 2,376 | -316 |
| Depreciation and amortization | 7,707 | 4,605 |
| Current income tax expenses | 1,010 | 873 |
| Income taxes paid less income taxes received | -893 | -3,437 |
| Financial income | -13 | -11 |
| Financial expenses | 315 | 257 |
| Interest paid | -315 | -275 |
| Interest received | 13 | 12 |
| Other non-cash expenses | 2,462 | 2,876 |
| Other non-cash income | -1,738 | -788 |
| Change in net pension provisions through profit or loss | 157 | 25 |
| Change in deferred taxes through profit or loss | 33 | -649 |
| Profit (-)/loss (+) on disposals of non-current assets | 0 | -22 |
| Increase (-)/decrease (+) in inventories, trade receivables and other assets | -12,419 | -6,027 |
| Increase (+)/decrease (-) in trade payables and other liabilities | 4,533 | 12,377 |
| Cash flow from operating activities | 3,228 | 9,500 |
| II. Investments | ||
| Incoming payments from disposals of non-current assets • Property, plant and equipment • Financial assets |
1 74 |
22 30 |
| Outgoing payments for investments in non-current assets • Intangible assets • Property, plant and equipment |
-2,626 -4,522 |
-3,073 -3,911 |
| Incoming payments from sale of companies previously consolidated, less cash funds thereby ceded |
0 | -871 |
| Cash flow from investing activities | -7,073 | -7,803 |
| III. Financing | ||
| Incoming funds from taking up of financial liabilities | 22,000 | 0 |
| Outgoing payments for repayment of financial liabilities | -7,454 | -496 |
| Cash flow from financing activities | 14,546 | -496 |
| IV. Cash-effective change in cash and cash equivalents (net balance of I – III) |
10,701 | 1,201 |
| Cash and cash equivalents at start of period | 22,708 | 24,095 |
| Impact of exchange rate movements | -552 | -277 |
| Cash and cash equivalents at end of period | 32,856 | 25,019 |
Subject to amendment.
Quarterly statements and half-year financial reports are neither audited nor subject to an audit review by the group auditor Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Stuttgart.
STRATEC SE (www.stratec.com) designs and manufactures fully automated analyzer systems for its partners in the fields of clinical diagnostics and biotechnology. Furthermore, the company offers complex consumables for diagnostic and medical applications. STRATEC covers the entire value chain – from development to design and production through to quality assurance.
The partners market the systems and consumables, in general together with their own reagents, as system solutions to laboratories, blood banks and research institutes around the world. STRATEC develops its products on the basis of its own patented technologies.
Shares in the company (ISIN: DE000STRA555) are traded in the Prime Standard segment of the Frankfurt Stock Exchange and are listed in the SDAX select index of the German Stock Exchange.
STRATEC SE Gewerbestr. 37 75217 Birkenfeld Germany Phone: +49 7082 7916-0 Fax: +49 7082 7916-999 [email protected] www.stratec.com
Forward-looking statements involve risks: This quarterly statement contains various statements concerning the future performance of STRATEC. These statements are based on both assumptions and estimates. Although we are convinced that these forward-looking statements are realistic, we can provide no guarantee of this. This is because our assumptions involve risks and uncertainties which could result in a substantial divergence between actual results and those expected. It is not planned to update these forward-looking statements.
This quarterly statement contains various disclosures that from an economic point of view are not required by the relevant accounting standards. These disclosures should be regarded as a supplement, rather than a substitute for the IFRS disclosures.
Apparent discrepancies may arise throughout this quarterly statement on account of mathematical rounding up or down in the course of addition.
In this quarterly statement, words in the masculine include words in the feminine; in parts of the quarterly statement, the masculine form has solely been used to make the document easier to read.
This quarterly statement is available in both German and English. Both versions can be downloaded from the company's website at www.stratec.com. In the event of any discrepancies between the two, the German report is the definitive version.
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