Interim report May-October 2018/19 Q2

Second quarter

•  Gross order intake amounted to SEK 3,670 M (3,267), an increase of 12 percent in SEK and 2 percent based on constant exchange rates.
•  Net sales was SEK 3,330 M (2,903), an increase of 15 percent in SEK and 6 percent based on constant exchange rates.
•  EBITA amounted to SEK 601 M (566).
•  EBITA margin was 18.0 percent (19.5).
•  Operating result was SEK 393 M (440).
•  Net income amounted to SEK 284 M (305). Earnings per share was SEK 0.75 (0.80) before/after dilution.
•  Cash flow after continuous investments was SEK 367 M (226).
•  Strengthened Elekta Unity sales funnel.

May-October

•  Gross order intake amounted to SEK 6,844 M (6,005), an increase of 14 percent in SEK and 6 percent based on constant exchange rates.
•  Net sales was SEK 6,149 M (5,407), an increase by 14 percent in SEK and 7 percent based on constant exchange rates.
•  EBITA amounted to SEK 987 M (987), including a positive effect of SEK 70 M related to a divestment in current period.
•  EBITA margin was 16.0 percent (18.2).
•  Operating result was SEK 631 M (721).
•  Net income amounted to SEK 450 M (504). Earnings per share was SEK 1.18 (1.32) before/after dilution.
•  Cash flow after continuous investments was SEK -175 M (131).
•  Net debt amounted to SEK 1,290 M (1,936).
•  Four Elekta Unity orders were added to the order backlog.

*Compared to last fiscal year based on constant exchange rates.
 

Outlook for fiscal year 2018/19 reiterated:

• Net sales growth of around 7 percent, based on constant exchange rates.
• EBITA margin of around 20 percent.
   

CEO comment 

A solid quarter with inspiring events and significant further improvement potential

Our second quarter came in strong in many aspects, we continued to increase orders and revenue, and cash flow development was positive. I’m also pleased that our software business is accelerating. Margins improved compared to the first quarter and we see significant further improvement potential in the second half. We have continued to build our Elekta Unity sales funnel and shortly after the end of the quarter two new systems were signed and we are in final negotiations on two more. Also, the investment plan in China for the coming years is exciting. Overall, I remain confident about our business and outlook for the full year.

The market remains solid and we saw double digit order growth for both treatment and software solutions, whereas service orders declined in some regions.

Orders were specifically strong in Europe, Middle East & Africa and Asia Pacific. I’m pleased to see that our new management in Europe and MEA is driving for results and have energized their organization. In the Americas, however, orders were weak in the quarter mainly related to a drop in service order intake in the US. As our installed base continues to grow, and with a clear focus on improving service order intake, we expect this to pick up in the second half of the year. Our estimate of the global market growth is approximately 7 percent. We maintain a positive view for all our regions.

Interest in Elekta Unity is firm and our sales funnel has continued to grow in the quarter although no orders were booked. The order process for Elekta Unity is long due to budget cycles and tender processes especially in the European public health sector. Two new agreements were signed in November and we are in final negotiations on two other systems. Our customers continue to give positive feedback on the system and the possibility it offers for more personalized precision radiation medicine for each patient.

Our revenue grew by 6 percent in the quarter (7 percent year to date), driven by a steady flow of installations across our markets, especially in North America, Europe, Middle East and China, as well as service revenue. The gross margin increased from the first quarter to 41.4 percent in the isolated quarter due to increased share of projects in mature markets, Leksell Gamma Knife™ and Brachy installations. This led to an EBITA margin of 18.0 percent in the quarter and 19.2 for the rolling 12-month period. We see further significant improvement potential in both gross and EBITA margin in the second half.

At the ASTRO meeting, I was glad to see the great interest in our solutions with more customer interactions and sales leads than ever before. Our new software suite, MOSAIQ® Plaza, drew a lot of attention with fully booked demos throughout the exhibition, as did Elekta Unity which is pending FDA clearance.

In late October, China’s Ministry of Health published a plan for investments in radiation therapy until 2020, with up to 1,400 new linacs to be ordered. Over the years Elekta has invested heavily in China – with both dedicated local R&D and manufacturing teams – and as the local market leader we are well placed to capture a large share of these orders. Our leadership was manifested in the beginning of November, when we were invited to the China International Import Expo in Shanghai as the only radiation therapy company. We signed letters of intent for future cooperation with almost 60 hospitals from all over China during the conference valued at over USD 100 M.

After the quarter Elekta signed a MOU with Australian based GenesisCare. The agreement stretches over 7 years and is worth around USD 60 M.

In summary, we see a continued strong market and our outlook for the year is positive and unchanged: we estimate that net sales will grow around 7 percent and that we will achieve an EBITA margin of around 20 percent for our current fiscal year.

Richard Hausmann
President and CEO

This is information is such that Elekta AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication by the below mentioned contact persons at 07:30 CET on November 29, 2018. (REGMAR)