· Long-term growth strategies remain unchanged. Delayed orders in EMEA and slower than expected market growth impacted first half-year results. Responsive action plan implemented.
· Order bookings increased 2 percent to SEK 5,217 M (5,128), equivalent to a decrease of 3 percent based on constant exchange rates.
· Net sales increased 2 percent to SEK 4,432 M (4,355), equivalent to a decrease of 3 percent based on constant exchange rates.
· EBITA amounted to SEK 359 M (555) before non-recurring items. Currency effects were neutral.
· Net income amounted to SEK 63 M (183). Earnings per share amounted to SEK 0.16 (0.48) before dilution and SEK 0.16 (0.48) after dilution.
· Cash flow after continuous investments amounted to SEK -497 M (-523).
Outlook for fiscal year 2014/15
· Based on the current market conditions net sales is expected to grow 4 percent (changed from 7‑9 percent) based on constant exchange rates. EBITA is expected to increase approximately 6 percent (changed from approximately 10 percent) based on constant exchange rates.
· Currency is expected to have a positive effect of approximately 7 percentage points on growth of net sales and approximately 2 percentage points on EBITA growth, including hedging effects.
· Cash flow after continuous investments is targeted to exceed SEK 1.1 bn, representing a cash conversion exceeding 60 percent.
* Compared to last fiscal year based on constant exchange rates.
President and CEO comments
We are currently not meeting our own performance targets due to delayed orders in EMEA and lower than expected overall market growth. Our strategic agenda has clear priorities and actions to strengthen cash flow, drive the top line and improve the efficiency and effectiveness of the organization. The performance in the second half of the fiscal year will improve but this will not be enough to fully compensate for a disappointing first half. Therefore, we have revised our outlook for the full fiscal year and implemented a responsive action plan.
The long-term growth perspective in cancer care is attractive and unchanged. We are uniquely positioned with superior solutions to support the unmet need in emerging markets. In mature markets we notice an increasing demand for software solutions that lead to better outcomes for patients and answer the need for more efficiency in health care systems. The market for new equipment however is currently growing at a slower pace than we anticipated coming in to the year, impacted by the global economy, political uncertainties and health care consolidation leading to larger orders which increases volatility.
The first half-year order intake was down 3 percent based on constant exchange rates.
In Europe, Middle East and Africa order intake was below Q2 last year, affected by slower market growth and delayed orders, the majority of which we expect will materialize in the second half of the fiscal year. Comparison with last fiscal year is difficult because of the large order in Algeria booked in the second quarter.
Versa HDTMhas been approved for sale in both China and Japan, which offers good growth opportunities. We are encouraged to see how order bookings have improved in the Asia Pacific region.
In North America we signed a large collaboration partnership with Avera Health to deploy MOSAIQ’s electronic medical record (EMR), treatment planning systems and cancer registry software – as well as Elekta hardware – throughout the six regional centers of the Avera Cancer Institute. The pipeline for large orders in the US is strong.
Net sales and EBITA
Net sales for the first half of the year was down 3 percent based on constant exchange rates.
Asia Pacific showed growth, mainly driven by India and China. North America improved and recorded strong growth for the second quarter. As expected, US software revenues started to improve and we forecast this to continue through the remainder of the year. Net sales in EMEA was below expectations due to project delays.
EBITA and gross margin improved compared to the first quarter. We are taking measures to control the growth of our expenses in order to deliver stronger EBITA in the second half of the fiscal year.
Cash flow after continuous investments improved to SEK 173 M (61) in the second quarter implying a cash conversion of 54 percent. This is a result of higher operating cash flow in combination with a positive effect from reducing net working capital. Measures to further improve cash flow are also expected to continue to show effect in the second half of the year.
Elekta is the innovation leader in the radiation therapy and radiosurgery market. Our commitment to innovation, as described in the strategic agenda, is robust. Innovation is the main driver for future growth. In the first half of the year we invested SEK 689 M in research and development. The key projects including Atlantic (MRI guided radiation therapy) are progressing according to plan.
The reaction from the market, on the introduction of our Information-guided cancer care™ solutions, was very positive. A key cornerstone of Information-guided cancer care is Elekta’s Knowledge Management platform, an oncology analytics solution that provides real-time dashboards and reports to help improve the quality of cancer care.
Responsive action plan
To address the current slower market growth, we have implemented additional measures to control expenses, while we continue to implement our strategic agenda priorities. We are reducing the cost base by removing duplication and capturing synergies across our operations. We will timely communicate the results and benefits of these actions in the coming quarters.
Outlook for FY 2014/15
We expect a better second half of the fiscal year based on our confidence in getting most of the delayed orders from EMEA, the approval to sell Versa HD™ in China and Japan, and increase of Leksell Gamma Knife® volumes. However this will not be enough to reach the growth levels we guided for in Q1.
Therefore we have changed our guidance for the full year to a net sales growth of 4 percent (changed from 7-9 percent), based on constant exchange rates. We have adjusted our expense growth accordingly. We expect EBITA to increase approximately 6 percent (changed from approximately 10 percent) based on constant exchange rates.
Currency is expected to have a positive effect of approximately 7 percentage points on growth of net sales and approximately 2 percentage points on EBITA growth, including hedging effects.
Our target is to reach cash flow after continuous investments exceeding SEK 1.1 bn, representing a cash conversion exceeding 60 percent (changed from 70 percent). The main reason for the change is increased uncertainties in some emerging markets.
Niklas Savander - President and CEO
Elekta will host a telephone conference at 10:00 – 11:00 CET on November 27, with President and CEO Niklas Savander and CFO Håkan Bergström.
To take part in the conference call, please dial in about 5-10 minutes in advance.
Swedish dial-in number: +46 (0)8 519 99 030, UK dial-in number: +44 (0)20 766 02077, US dial-in number: +1 855 716 1592.
The telephone conference will also be broadcasted over the internet (listen only). Please use the link:
Interim report May – January 2014/15 March 4, 2015
Year-end report May – April 2014/15 June 2, 2015