· Volatility around the timing of large orders, a less favorable product mix and slower growth in certain markets impacted the quarterly performance.
· Our pipeline is strong and we reaffirm the outlook for the current fiscal year.
· Actions to improve efficiency, control costs and improve cash flow are on track.
· Order bookings decreased 4 percent to SEK 8,051 M (8,352), equivalent to a decrease of 10 percent based on constant exchange rates.
· Net sales increased 4 percent to SEK 6,984 M (6,740), equivalent to a decrease of 3 percent based on constant exchange rates.
· EBITA amounted to SEK 705 M (895) before non-recurring items. Currency effects amounted to approximately SEK 40 M.
· Net income amounted to SEK 215 M (333). Earnings per share amounted to SEK 0.55 (0.87) before dilution and SEK 0.55 (0.87) after dilution.
· Cash flow after continuous investments amounted to SEK -541 M (-550).
Outlook for fiscal year 2014/15
· Based on the current market conditions net sales are expected to grow 4 percent based on constant exchange rates. EBITA is expected to increase approximately 6 percent based on constant exchange rates.
· Currency is expected to have a positive effect of approximately 9 percentage points (changed from 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.
This report includes forward-looking statements including, but not limited to, statements relating to operational and financial performance, market conditions, and other similar matters. These forward-looking statements are based on current expectations about future events. Although the expectations described in these statements are assumed to be reasonable, there is no guarantee that such forward-looking statements will materialize or are accurate. Since these statements involve assumptions and estimates that are subject to risks and uncertainties, results could differ materially from those set out in the statement. Some of these risks and uncertainties are described further in the section “Risks and uncertainties”. Elekta undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or stock exchange regulations.
President and CEO comments
Volatility around the timing of large order placements, a less favorable product mix and slower growth in certain markets, resulted in a weak quarterly performance. At the same time, we are working on a bigger pipeline of large orders than ever before. Our efforts to manage working capital and cash flow are showing results and we are making good progress with the implementation of our strategic agenda. With a strong pipeline, good sales momentum for Leksell Gamma Knife® and our confidence in a strong year end, we reiterate our outlook for the full fiscal year.
In the radiotherapy market the importance of large projects continues to grow. This has resulted in increased volatility between quarters, which became apparent in the third quarter when fewer large orders were realized compared to the same period last year. For the first nine months of the fiscal year, order bookings were down 4 percent in SEK and down 10 percent based on constant exchange rates.
In the third quarter Elekta won a substantial amount of orders in the EMEA region. We are especially pleased with the order development in Africa where we are strengthening our market position.
Volatility was particularly apparent in North and South America, where no large orders were booked this quarter, creating a tough year-on-year comparison. At the same time, the order pipeline in North America continues to increase.
Order bookings in China and Japan declined due to more constrained public healthcare investments in the period.
Net sales and EBITA
Net sales for the first nine months of the fiscal year grew by 4 percent in SEK and were down 3 percent based on constant exchange rates. This weak performance is an outcome of lower shipment volumes compared to last year, a less favorable product mix and slower growth in certain markets. Net sales in the EMEA region improved to low-single digits in the third quarter. North American sales were slightly negative. Net sales in the Asia Pacific region declined due to slower market development in China and Japan.
The contribution margin declined in all regions due to a less favorable product mix. The measures that we have taken to control costs have begun to show in our EBITA growth, a positive trend that is expected to continue.
Cash flow continues to be our priority. Cash flow from operating activities improved to SEK 158 M (44) including a negative effect of SEK 88 M from payments related to our ongoing restructuring program. Continuous investments increased 18 percent to SEK 700 M where the main driver is the ongoing R&D programs, related to the long term investment phase we are in. We expect to make further improvements in cash flow in the fourth quarter.
To build the long-term competitiveness of the Company, Elekta continues to invest significantly in R&D. On 22 January we updated (http://www.elekta.com/dms/elekta/elekta-assets/Investors/pdf/presentations/Elekta-R-and-D-Update.pdf) the financial markets on our R&D initiatives, with special focus on Atlantic, the first generation high field MRI-guided radiation therapy system.
Responsive action plan
We continue to roll out additional measures to control expenses that we announced with our Q2 results, as well as executing our strategic priorities.
Outlook for FY 2014/15
We expect a strong final quarter of the fiscal year based on our current pipeline, good sales momentum for Leksell Gamma Knife and favorable exchange rates. Therefore, we reiterate our guidance for the full year of a net sales growth of 4 percent, based on constant exchange rates. We expect EBITA to increase approximately 6 percent based on constant exchange rates. Currency is expected to have a positive effect of approximately 9 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.
Niklas Savander - President and CEO
Elekta will host a telephone conference at 10:00 – 11:00 CET on March 4, 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.
Sweden: +46 8 566 426 69, UK: +44 20 342 814 09, USA: + 1 855 753 22 35
The telephone conference will also be broadcasted over the internet (listen only). Please use the link:
Year-end report May – April 2014/15 June 2, 2015
Interim report May – July 2015/16 September 1, 2015
Annual General Meeting 2015 September 1, 2015
Interim report May – October 2015/16 December 4, 2015