· Gross order intake amounted to SEK 4,366 M (5,238), a decrease of 17 percent in SEK and 20 percent based on constant exchange rates.
· Net sales was SEK 3,715 M (3,607), an increase of 3 percent in SEK and unchanged based on constant exchange rates.
· Adjusted EBITA* amounted to SEK 779 M (785). Items affecting comparability amounted to SEK -253 M (-459) and bad debt losses to SEK -16 M (-43).
· The effect from changes in exchange rates compared with last year was approximately SEK 75 M (40) including hedges.
· Adjusted EBITA* margin was 21 percent (22).
· Operating result was SEK 347 M (155).
· Net income amounted to SEK 93 M (78). Earnings per share was SEK 0.24 (0.20) before/after dilution.
· Cash flow after continuous investments improved to SEK 1,016 M (663). Cash outflow related to the transformation program and legal processes was SEK -121 M (-154).
· Gustaf Salford was appointed Executive Vice President and Chief Financial Officer effective July 1, 2017.
· Gross order intake amounted to SEK 14,064 M (13,821), an increase of 2 percent in SEK and a decrease of 1 percent based on constant exchange rates.
· Net sales was SEK 10,704 M (11,221), a decrease of 5 percent in SEK and 7 percent based on constant exchange rates. The decline is mainly related to one-off effects from implementing the produce-to-order process.
· Adjusted EBITA* amounted to SEK 1,661 M (1,639). Items affecting comparability amounted to SEK -518 M ( 598) and bad debt losses to SEK -46 M (-149).
· The effect from changes in exchange rates compared with last year was approximately SEK 315 M (60) including hedges.
· Adjusted EBITA* margin increased to 16 percent (15).
· Operating result was SEK 598 M (423).
· Net income amounted to SEK 126 M (145). Earnings per share was SEK 0.33 (0.36) before/after dilution.
· Cash flow after continuous investments improved by SEK 649 M to SEK 1,045 M (396). Cash outflow related to the transformation program and legal processes was SEK -575 M (-250).
· The Board of Directors propose a dividend of SEK 1.00 (0.50) per share for fiscal year 2016/17.
*Adjusted for items affecting comparability and bad debt losses, for a reconciliation to operating result, see page 12.The split between restructuring costs and costs for legal processes, is presented on pages 19.
President and CEO comments
In May, we presented Elekta Unity, the next generation radiation therapy system. The positive response from our customers has been overwhelming. Unity is a new paradigm shifting system for radiation therapy, with innovative technology that creates completely new and unique opportunities for improvements in cancer care. We have completed our transformation program and cash flow has improved significantly. We are on track to reaching our targets and we will further implement continuous efficiency measures.
Order intake for the year grew by 2 percent, representing a decline of 1 percent based on constant currencies. Order growth in region Europe, Middle East and Africa as well as Asia Pacific was solid, with an increase of 4 percent and 5 percent respectively based on constant currencies. In Europe, we secured a number of important orders, including some early orders for Elekta Unity. In Asia, we noted strong growth in China and India. Our fourth quarter had significantly fewer large orders and book and bills compared with the same quarter last year.
Our main challenge and priority is USA, where order bookings decreased for the year. I am not satisfied with the performance, which is why we have accelerated the improvement measures launched earlier. As part of this we have appointed Peter Gaccione as Executive Vice President for North America with immediate effect. Peter is currently Senior Vice President Latin America and have 35 years of experience from the oncology business. He has been at Elekta for 20 years and before that he was 15 years at Siemens Medical Systems.
In May, we presented our groundbreaking Elekta Unity system for customers in Europe. Unity combines radiation therapy and high field MR visualization in real time. We are convinced that the new technology will revolutionize radiation therapy and create completely new opportunities for clinicians and their patients. An important part of the Unity development is its advanced software. We will now invest further in software development and leverage our expertise from Unity to our existing portfolio, with our new focus on Elekta Digital.
We continue to optimize our processes and the implementation of the produce-to-order process has been completed. The change has resulted in shorter lead times with significantly lower working capital, but has had a temporary negative impact of SEK 650 M on revenues in the first half. Net sales for the year was flat if adjusted for the produce-to-order implementation and decreased by 7 percent when included, based on constant currencies. In addition, the new ship to install process has reduced book and bill volumes.
We had a robust order intake for Leksell Gamma Knife® during the year and ended with a solid backlog. As we successfully have implemented our produce to order and ship to installation process it resulted in significantly less shipped Leksell Gamma Knife® units at year end in relation to recent years. Also with this temporary effect, net sales in the fourth quarter was flat, which is very good to see.
Our cash flow has improved approximately SEK 1* billion, through activities for working capital reduction including a significant reduction of inventory. The net working capital to sales ratio is now at -6 percent. Our activities within the transformation program have now been implemented and we have taken all one-off costs related to the program. We have achieved costs savings of SEK 540 M and will achieve the savings target of SEK 700 M when the reductions related to purchasing are fully realized in 2017/18.
Adjusted EBITA margin for the year was 16 percent (15). During the year, and in line with the work to improve our processes, we have reviewed outstanding not yet installed projects. In agreement with the customers, we then have decided to take back treatment systems which are not deemed to be installed. In line with the plan, costs for commercializing Elekta Unity increased during the fourth quarter.
Our delivery process will be further improved. We have decided to implement a new revenue recognition principle from fiscal year 2018/19. In line with IFRS15, we will recognize system revenue after installation instead as of currently upon shipment. This will improve our efficiency even further. See page 11.
In addition to North America, we have further strengthened our leadership team with our new Chief Marketing Officer Ioannis Panagiotelis and Karin Svenske-Nyberg as EVP of HR. In addition, on July 1st 2017, Gustaf Salford will take over from Håkan Bergström as CFO. On May 1, Tomas Puusepp stepped down as Executive Director of the Board and is now a non-executive board member.
This was a year of transformation and I summarize the negative effect from implementing produce to order, costs related to taking back treatment systems as well as less book and bill volumes at year end to some 3 percentage points on the EBITA margin. Next year, I expect a significant reversal of those effects. The market for radiation therapy is growing. We have a strong order backlog going into fiscal year 2017/18 and we will deliver larger volumes from the backlog than the previous year. We are at an inflection point and I see 2017/18 as the year we once again achieve profitable growth and reach the target of an EBITA margin exceeding 20 percent, with volume as the main driver.
President and CEO
*Cash flow after continuous investments. Adjusted for items affecting comparability of SEK 325 M (refer to page 6), related to cash outflow attributable to legal processes and the transformation program.
Elekta will host a telephone conference and a webcast at 15:00-17:00 CET on June 1, with president and CEO Richard Hausmann, CFO Håkan Bergström, and CMO Ioannis Panagiotelis.
To take part in the conference call, please dial in about five minutes in advance.
Swedish dial-in number: +46 (0) 8 56 64 25 08
UK dial-in number: +44 (0) 203 008 98 01
US dial-in number: +1 646 502 51 18
The webcast will be through the following link:
Elekta is proud to be the leading innovator of equipment and software used to improve, prolong and save the lives of people with cancer and brain disorders. Our advanced, effective solutions are created in collaboration with customers, and more than 6,000 hospitals worldwide rely on Elekta technology. Our treatment solutions and oncology informatics portfolios are designed to enhance the delivery of radiation therapy, radiosurgery and brachytherapy, and to drive cost efficiency in clinical workflows. Elekta employs 3,600 people around the world. Headquartered in Stockholm, Sweden, Elekta is listed on NASDAQ Stockholm www.elekta.com